Preparing for retirement is a significant financial goal that requires careful planning. As I approach my early 40s, I am aiming to retire within the next 10 to 15 years. Currently, my monthly family expenses are modest, totaling around Rs 25,000. To ensure financial security in my post-retirement years, I am considering investing Rs 50,000 per month in mutual funds through a Systematic Investment Plan (SIP). I am interested to know the potential accumulation over 15 years with this SIP strategy. How much can I expect to accumulate by investing Rs 50,000 per month?
Advice by Nilesh D Naik, Head of Investment Products, Share.Market
A monthly SIP of Rs 50,000 could fetch approx. Rs 2 crore at the end of 15 15-year period, assuming an annualised return on portfolio of 10%. If the annualised return is increased to 12%, the amount could grow to Rs. 2.4 crore at the end of 15 years.
When you do an SIP for a long-term investment goal such as retirement, it may also be advisable to increase your SIP amount annually in line with the increase in your income. Now, if the SIP contribution is increased annually at a rate of 10% and if the annualised return earned is 10%, the final amount could grow to Rs. 3.6 cr. If the annualized return earned is 12%, the final corpus could grow to Rs. 4.1 crore.
Assumed annualized return
| 10% | 2.0 cr | 3.6 cr |
| 12% | 2.4 cr | 4.1 cr |
Whether the above corpus is sufficient to lead a financially secured retirement life would depend on multiple factors such as your current age, your monthly expenses if you were to retire today, life expectancy, inflation, potential return on post retirement corpus, etc. The table below can help assess the readiness for retirement based on your current and retirement age and assumed inflation rate, life expectancy and ROI on the retirement corpus, post retirement.
For eg, if you are currently 35 years old and planning to retire 15 years later, i.e. at the age of 50, for every Rs. 10,000 of monthly expense, you would need a retirement corpus of Rs. 73 Lakhs. So if your monthly expense is Rs. 50,000, the retirement corpus required would be Rs. 73 Lakhs multiplied by 5, which is Rs. 3.65 crore.
| Your current age | At age 40 | At age 45 | At age 50 | At age 55 | At age 60 |
|---|---|---|---|---|---|
| 30 | 65 | 80 | 98 | 117 | 136 |
| 31 | 61 | 76 | 92 | 111 | 129 |
| 32 | 58 | 71 | 87 | 104 | 121 |
| 33 | 54 | 67 | 82 | 98 | 114 |
| 34 | 51 | 64 | 78 | 93 | 108 |
| 35 | 48 | 60 | 73 | 88 | 102 |
| 36 | 46 | 57 | 69 | 83 | 96 |
| 37 | 43 | 53 | 65 | 78 | 91 |
| 38 | 41 | 50 | 61 | 74 | 86 |
| 39 | 38 | 48 | 58 | 69 | 81 |
| 40 | 36 | 45 | 55 | 65 | 76 |
| 41 | - | 42 | 52 | 62 | 72 |
| 42 | - | 40 | 49 | 58 | 68 |
| 43 | - | 38 | 46 | 55 | 64 |
| 44 | - | 35 | 43 | 52 | 60 |
| 45 | - | 33 | 41 | 49 | 57 |
| 46 | - | - |
(Views expressed by the expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)