Retirement Planning Tips: For big goals, you have to take small steps. If you think that you will climb mountains in a single step, then it is impossible. Something similar is with investments. If you want to have enough money on retirement so that you can live your life well, then you have to prepare for it from now.
The sooner you start, the more funds you will be able to raise for your retirement. Let’s try to understand how much time it will take to create a retirement fund of Rs 1 crore by investing Rs 10,000 every month in Systematic Investment Plan (SIP).
For a retirement fund of Rs 1 crore, we will calculate here on the basis of 10%, 12% and 14% annual return rate on investment. Past trends regarding returns on mutual fund SIPs show that 10-14% CAGR is moderate and can be easily achieved. Let us see how a 25-year old investor can earn Rs 1 crore by investing Rs 10,000 every month at different return rates.
SIP: 10% annual return
- Time to reach corpus of Rs 1 crore: 22.5 years (age 47.5 years)
- Total investment: Rs 27 lakh
- Estimated profit: Rs 74.64 lakh
- Total funds in 22.5 years: Rs 1.02 crore
- In this context, a 25-year-old can become a crorepati in 22.5 years by investing Rs 10,000 per month in mutual funds through SIP.
SIP: 12% annual return
- Time to reach a fund of Rs 1 crore: 20 years (age 45 years)
- Total investment: Rs 24 lakh
- Estimated return: Rs 76 lakh
- Total fund: Rs 1 crore
An investment of Rs 10,000 per month at 12% annual return can yield a retirement fund of Rs 1 crore in 20 years.
SIP: 14% annual return
- Time to reach Rs 1 crore fund: 18.5 years (age 43.5 years)
- Total investment: Rs 22.2 lakh
- Estimated return: Rs 83 lakh
- Total fund: Rs 1.05 crore
With a 14% return on investing Rs 10,000 every month, investors can achieve the target of Rs 1 crore fund in just 18.5 years.
These examples make it clear how important it is to start early and invest in SIP with discipline for a large retirement fund. It would not be wrong to say that with consistent monthly investments through SIP, anyone can become a crorepati in a short time.
