You can build a ₹3 crore retirement fund even at the age of 40! How much should you invest via SIP each month?
If you are 40 years old and have not yet accumulated significant savings for retirement, you still have an opportunity to plan your investments. You have a 20-year window to build a retirement fund by the age of 60. However, this will require consistent investing, along with an annual increase in your SIP (Systematic Investment Plan) contribution.
If you start an SIP of ₹15,000 per month and increase the contribution by 10% each year, you could potentially build a fund of approximately ₹3 crore by the age of 60. This calculation assumes an annual return of 12%.
How much will you accumulate by investing ₹15,000 per month?
If you invest ₹15,000 every month for 20 years without increasing your SIP amount, your total investment will be ₹36 lakh.
Monthly investment: ₹15,000
Investment duration: 20 years
Total amount invested: ₹36 lakh
Fund value at 10% annual return: Approximately ₹1.15 crore
Fund value at 12% annual return: Approximately ₹1.50 crore
In other words, it would be difficult to reach a target of ₹3 crore with a fixed monthly SIP of only ₹15,000. To achieve this, you would need to either increase your investment amount annually or start with a higher monthly contribution.
What is the benefit of increasing your SIP contribution by 10% each year?
Complete SIP calculation to accumulate ₹3 crore:
Current age: 40 years
Investment duration: 20 years
Initial monthly SIP: ₹15,000
Annual increase in SIP: 10%
Estimated annual return: 12%
Potential fund by age 60: Approximately ₹3 crore
Do not overlook inflation when building a retirement fund.
For instance, suppose your family’s current monthly expenses are ₹30,000. If inflation remains at 6% per annum, these same expenses could rise to approximately ₹96,000 per month in 20 years' time. In such a scenario, simply having a large corpus at the time of retirement is not enough; one must also ensure that it will be sufficient to cover future expenses.
When planning your investments, take into account the funds accumulated in your EPF, PPF, and NPS accounts. This will help you determine how much additional savings you need to accumulate through mutual fund SIPs.
Disclaimer: This content has been sourced and edited from Dainik Jagran. 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.
