Retirement Planning via One-time Investment: Having financial goals in one’s life gives them purpose to progress. They build a corpus or generate income sources that help them achieve those goals. But since these goals may require large amounts, one may need to plan for them in advance. They may start their retirement corpus-building journey from an early age. An early start can give them the benefit of years of compounding! It can boost their small investments to grow to a large corpus.
If one has a long-term investment horizon, even a Rs 7,75,000 one-time investment can generate a retirement corpus of Rs 2,60,00,000; know it may be possible!
Power of compounding in retirement corpus building
The power of compounding works the most for investors with a long-term investment horizon.
They may achieve a larger corpus with a small investment amount compared to a late beginner who has a shorter investment duration.
Let’s understand this change with a couple of examples.
Amount required to build Rs 5 crore corpus in 25, 35 years
A and B investors are aiming for a Rs 5 crore corpus for their retirement, which will begin at age 60.
A is 25 years old, so can invest for 35 years.
On the other hand, B is 35 years old and can invest for 25 years.
Both are expecting a 12 per cent annualised return from their respective investments.
Let’s see the estimated monthly SIP investment they require to achieve the target.
In 35 years, A can achieve the target with an estimated monthly SIP investment of Rs 9,074, and an overall investment of Rs 38,11,080.
On the other hand, B can achieve the target with an estimated monthly SIP investment of Rs 29,374 and the overall estimated amount of Rs 88,12,200.
Corpus from Rs 12,000 monthly SIP in 20 and 30 years
A and B want to invest Rs 12,000 monthly in an SIP, where they are expecting a 12.5 per cent annualised return.
A wants to do it for 30 years, while B wants to do it for 20 years. Let’s see how much corpus they may generate.
A’s total investment in 30 years will be Rs 43,20,000, estimated capital gains will be Rs 3,65,22,616, and the estimated corpus will be Rs 4,08,42,616.
B’s total investment in 20 years will be Rs 28,80,000, estimated capital gains will be Rs 88,47,071, and the estimated corpus will be Rs 1,17,27,071.
In both examples above, you can see how a 10-year delay may cost dearly. By investing for a few more years, the difference in the corpus generated may be huge.
From Rs 7,75,000 one-time investment to Rs 2,60,00,000 retirement corpus
We will show how many years it may be possible if the investor gets a 12 per cent annualised growth on their investment.
We will show a breakup of the growing corpus.
Retirement corpus from Rs 7,75,000 one-time investment in 10 years
In 10 years, estimated capital gains will be Rs 16,32,032, and the estimated corpus will be Rs 24,07,032.
Retirement corpus from Rs 7,75,000 one-time investment in 20 years
In 20 years, estimated capital gains will be Rs 67,00,877, and the estimated corpus will be Rs 74,75,877.
Retirement corpus from Rs 7,75,000 one-time investment in 30 years
In 30 years, estimated capital gains will be Rs 2,24,43,940, and the estimated corpus will be Rs 2,32,18,940.
Retirement corpus from Rs 7,75,000 one-time investment in 31 years
In 31 years, estimated capital gains will be Rs 2,52,30,212, and the estimated corpus will be Rs 2,60,05,212.
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
