SIP Calculator: Even with zero savings until age 40, you can build a retirement fund of ₹3 crore by age 60..

SIP Calculator: Many people realize the importance of saving and investing quite late, often feeling that the opportunity has already passed them by. However, this is not entirely true. While starting early offers many advantages, it is still possible to build a substantial retirement fund even if you begin investing later in life.

You can start investing for retirement even at the age of 40

Even if you are 40 years old, you can still begin investing for your retirement. However, you will need to invest a larger amount each month. If an individual starts investing for retirement at age 40, they have a 20-year horizon—a duration that is neither too long nor too short.

Inflation must be factored into retirement fund calculations.

It is generally suggested that your retirement fund should be 25 to 30 times your annual expenses. For instance, if a family’s current monthly expenditure is ₹30,000, and assuming an inflation rate of 6%, this monthly expense would rise to ₹96,000 in 20 years. A corpus equivalent to 25 times that amount would be approximately ₹2.9 crore.

A monthly SIP of ₹15,000 can help build a fund of ₹1.5 crore

If you invest ₹15,000 every month through a SIP, you will have invested a total of ₹36 lakh over 20 years. With an annual return of 10%, your investment would grow to ₹1.15 crore after 20 years. If the annual return is 12%, the amount would grow to approximately ₹1.5 crore. Please note that this is merely an example; returns on investments in equity funds are not guaranteed. Increasing the Monthly SIP Amount to Build a ₹3 Crore Fund

If you aim for a retirement fund of ₹2.9 crore, you would need to invest approximately ₹29,000 every month, assuming an annual return of 12%. This amount might seem high, especially for a 40-year-old who likely carries various family responsibilities. However, there is an alternative approach.

Increasing Your SIP by 10% Annually Can Be Highly Beneficial

If you start with a monthly SIP of ₹15,000 and increase it by 10% each year, you could accumulate a fund of nearly ₹3 crore, assuming a 12% annual return. You should aim to increase your SIP amount in line with the growth of your income and cut down on unnecessary expenses. If needed, you could also consider extending your planned retirement age to 62 or 63.

Investing in PPF Can Also Make Building a Retirement Fund Easier

If you are employed, regular contributions to the EPF (Employees' Provident Fund) will also help build a substantial corpus; you should check the projected size of this fund. Additionally, you could consider investing in the Public Provident Fund (PPF), which matures in 15 years. For the December quarter, the interest rate on the PPF is 7.1%. The government reviews the interest rates for small savings schemes, including the PPF, on a quarterly basis.

NPS Has Also Become Quite Attractive for Subscribers Following Recent Changes

The National Pension System (NPS) has also become significantly more attractive, following several recent changes introduced by the PFRDA. If your NPS corpus reaches ₹12 lakh or more, you are permitted to withdraw 80% of the amount as a lump sum upon reaching the age of 60, with the remaining 20% ​​allocated toward an annuity. Second, subscribers can maintain their investments until the age of 85.

Key points to keep in mind when investing monthly:

If you begin investing at the age of 40, a significant portion of your capital should be allocated to diversified equity funds, such as index funds or flexi-cap funds. It is advisable to invest via a Systematic Investment Plan (SIP). As retirement approaches, many experts recommend gradually shifting funds from equity-oriented investments into hybrid or debt funds. This approach helps protect your retirement corpus from the adverse impact of a sudden market downturn.

Disclaimer: The views expressed by experts on Moneycontrol are their own and do not necessarily reflect the views of the website or its management. Moneycontrol advises users to consult with certified financial experts before making any investment decisions.