Retirement Planning: A monthly SIP of ₹50,000 can build a retirement fund of ₹8 crore—find out how..

People often have various questions regarding retirement planning. One such question is: Can a 35-year-old individual earning a monthly salary of ₹2 lakh build a retirement fund of ₹5–8 crore by investing ₹50,000 per month?

**Retirement fund target and monthly investment details are crucial**

Moneycontrol posed this question to Sanjeev Bajaj, Joint Chairman and MD of Bajaj Capital. He stated that two factors are absolutely clear in this scenario: first, the size of the retirement fund the individual aims to build; and second, the amount they can invest monthly. The next step is to determine whether the target is achievable based on these two inputs.

**Starting investment at age 35 provides a 25-year horizon**

Suppose you invest ₹50,000 every month until you reach the age of 60. This means that if you start investing at 35, you will have a period of approximately 25 years for investment. The final retirement fund corpus will depend on market returns.

**The size of the retirement fund will vary based on annual returns**

Let us consider three different scenarios. In the first, assuming an annual return of 8%, the retirement fund would amount to approximately ₹4.6 crore. If we assume an annual return of 10%, the fund would grow to ₹6.2 crore. At a 12% return, it would reach approximately ₹8.5 crore.

**The impact of inflation on the retirement fund must be considered**

This implies that, based on these calculations and varying rates of return, it is indeed possible to build a retirement fund in the range of ₹5–8 crore. However, a major question arises: what will be the real value of ₹5–8 crore twenty-five years from now? Assuming an inflation rate of 6%, the purchasing power of ₹5 crore after 25 years would effectively be around ₹1.2 crore.

Inflation gradually erodes the value of money over the long term.

The purchasing power of ₹8 crore would effectively be ₹1.9 crore. This means that in 25 years, ₹8 crore will buy only what ₹1.9 crore can buy today. Therefore, it is crucial to consider your lifestyle when planning for retirement.

Gradually increasing the SIP amount makes a significant difference over the long term.

Increasing your SIP amount over time has a major impact on retirement planning. If you start investing ₹50,000 per month at age 35, your monthly investment won't remain static throughout your career; you can increase it as your income grows. Raising the amount by 10% annually can lead to a substantial difference in the outcome.

Prioritizing diversification in your investments is also essential.

When investing for the long term, you might consider equity-linked investment options. However, diversification is key. Your retirement plan could include contributions to the EPF or NPS. As you approach retirement, your focus should shift from wealth creation to wealth preservation.

Keep these three factors in mind while investing.

You must also maintain health insurance, term insurance, and an emergency fund. The benefit of doing so is that your investments will remain unaffected in the event of an unforeseen crisis. Additionally, you need to review your investment plan once a year. You can make changes to the plan if necessary. In this way, you can build a substantial retirement fund for yourself.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.