Let's consider a retirement corpus of Rs. 1 crore. Assuming retirement at 60 and starting investment at 28 with an expected annual return of 12% (through equity-linked Mutual Funds), the required monthly investment is Rs. 2,225. Over 32 years, an investment of Rs. 8.5 lakh accumulates to Rs. 1 crore. Now, let's examine the consequences of starting 10 years later.
Beginning investment at 38 necessitates a monthly investment of Rs. 10,010 for 22 years to reach Rs. 1 crore by age 60. With a 10-year delay, the investment amount increases almost 4.5 times, totaling Rs. 26.4 lakh. Compensating for lost time becomes challenging, as illustrated below.
Starting at 25 with a monthly investment of Rs. 5,000 for 35 years yields a corpus of Rs. 3.2 crore at age 60, with a total investment of Rs. 21 lakh. Conversely, initiating investment at 45 with Rs. 20,000 monthly for 15 years results in a corpus of Rs. 1 crore, with a total investment of Rs. 36 lakh.
Despite investing four times more, the corpus fund is significantly lower due to the shorter investment period. Starting early with a modest investment is advisable for higher returns.
Therefore, initiating investment early is crucial. It not only requires lower investment amounts but also leads to higher corpus funds.
Author: K. Kirubakaran | Founder: www.moneykriya.com