Want Rs 1 lakh monthly income at retirement? Here's how much you should invest monthly if you are 25, 35, or 45-year-old
Retirement Planning: If one aims at getting a Rs 1 lakh monthly income at retirement, the key is to start investing early. The benefit of starting early is that one can achieve the goal with a lower monthly SIP investment compared to a person who starts retirement planning late.
Retirement Planning: A financially free retirement, where one has a passive income to run their expenses, is important for any individual. One needs meticulous retirement planning to achieve the goal of financial freedom. But the one who starts their retirement planning early always has a significant edge over someone who begins their investment journey late. The reason is extra years of compounding can make their path to create a retirement corpus earlier. Similarly, if one is targeting to get a Rs 1 lakh monthly income at retirement, they need to begin their investment early. In the write-up, through expert calculation, we will show how a delay of a few years can force a person to invest a much higher monthly amount compared to an early starter. And what should be their monthly SIP investment to get Rs 1 lakh monthly income at retirement if they start investing at 25, 25, or 45 years of age.
(Calculation Chart Courtesy: Ranbheer Dhariwal, Chief Executive Officer - Max Life Pension Fund Management)
Photos: Pixabay/Unsplash)
Why retirement planning is necessary?
When you grow old, there are chances that your expenses will reduce, but even then, you need a regular income flow. That should be passive income, as you may have a few or no active income sources by that age. That passive income can come through a retirement corpus. The corpus can be generated only when you have a retirement goal-orientated plan and you adhere to the same.
What should be your retirement corpus?
It should be based on the money you need to maintain your current lifestyle. Do you want to maintain the same lifestyle or want an upgrade at retirement? You should ask these questions of yourself before starting to invest for retirement.
Why is inflation a factor in retirement planning?
Suppose your monthly expenditure is Rs 40,000 today. Will it be the same 10 years down the line? Even if your lifestyle is the same as it is today, you need more money for sure. The inflation rate in India can be calculated at 5 or 6 per cent for retirement.
What is the right age to start investing for retirement?
There is no ideal age. As soon as one starts earning, they can start their retirement planning. Even if the monthly savings are not much. One can start their investment and gradually increase the amount with a rise in income.
How starting late can affect retirement planning
Let's assume A and B target a Rs 5 crore retirement corpus each. A has a 30-year investment horizon, while B has a 20-year horizon. Both expect to get a 12 per cent annualised return on their investment.
How starting late can affect retirement planning
A can achieve the Rs 5 crore corpus target with an estimated monthly SIP investment of Rs 14,200.
B needs an estimated Rs 50,045 monthly to achieve the same target. Ten years of extra compounding is making the job easier for A.
Retirement planning example
A is a daily wage worker. In their small savings every month, they can invest Rs 3,000 a month. B has a job in a multinational company and can easily invest Rs 30,000 a month through SIP. A can invest this amount for 40 years, and B wants to invest it for 20 years.
Retirement planning example
In 40 years, A will invest Rs 14,40,000, and their estimated corpus will be Rs 3,56,47,261.
In 20 years, B will invest Rs 72,00,000, but their estimated corpus will be Rs 2,99,74,438.
In 1/5th of the B's investment amount, A can create a near-Rs 57 lakh higher corpus.
Investment avenues for retirement
The investor can invest in fixed assets such as fixed deposits, government bonds, or in market-linked options such as equity and equity-related instruments. Ideally, one should keep a mix of both.
How to get Rs 1 lakh monthly at retirement
Here, we are taking ages 25, 35, and 45 years, and the expected annualised return is 12 per cent. The retirement age in all 3 cases is 60 years, and the expected return post retirement is 6 per cent.
How to get Rs 1 lakh monthly at retirement if you start at 25
In all 3 cases, the expected corpus to get a Rs 1 lakh pension at retirement will be Rs 2 crore. So the retirement corpus target in all 3 cases will be Rs 2 crore.
If someone starts investing at 25 years of age, their monthly SIP investment should be Rs 3,643.
How to get Rs 1 lakh monthly at retirement if you start at 35
If someone starts investing at 35 years of age, their monthly SIP investment should be Rs 11,766.
How to get Rs 1 lakh monthly at retirement if you start at 45
If someone starts investing at 25 years of age, their monthly SIP investment should be Rs 42,610.
Calculation chart
| Age | Monthly Contribution (Rs) | Assumed Rate of Return | Corpus at Age 60 (Rs) | Assumed Annuity Rate | Annuity Payout/Month (Rs) |
| 25 Years | 3,643 | 12% | 2Cr | 6% | 1,00,000 |
| 35 Years | 11,766 | 12% | 2 Cr | 6% | 1,00,000 |
| 45 Years | 42,610 | 12% | 2 Cr | 6% | 1,00,000 |