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I am 30. Want to Retire at 50. How much to Invest Monthly?

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I got a mail from a reader asking how much he needed to invest to retire at the age of 50. He is 30 and said that he had practically no savings at all. So it’s like starting your investment journey.

Retire At 50 India

In this post, we discuss – How a 30-year old can retire at age 50 by investing regularly in India?

Most people will retire at 60. So retire at 50 is a case of early retirement. The person may not actually retire but may still achieve a level of financial independence so that he can be out of the rat race that many people struggle to remain a part of.

I do not have more information about other important factors/inputs that one needs to do proper retirement planning calculations like – How long will you live? How long will your spouse need support? What will be the inflation? What will be the returns from debt investments? What will be the returns from equity investments? How much will your basic expenses be? How much will be your lifestyle-related discretionary expenses? Will you need additional health care support? Etc. Etc. Do read about these factors in detail here at Retirement Planning – a ‘Nasty Problem’.

So in absence of few data points, I will rely on target retirement corpus figures that the person may aim for.

The reader has 20 years to save for retirement.

How much will the retirement cost?

Let’s analyze for few scenarios like Rs 1 crore, Rs 2 crore, Rs 3 crore, Rs 4 crore, Rs 5 crore, Rs 7 crore and Rs 10 crore.

Given the investment horizon of 20 years, the best asset to invest in is equity. Atleast a major portion should be in equities. Equity can be expected to deliver 10-12% average returns in the long run (check the historical Nifty returns data). If you are a conservative investor, you will have a smaller equity allocation and hence, comparatively lower portfolio returns.

But assuming that the young reader is moderately aggressive, let’s say he is willing to have 70% equity and 10% Debt. Assuming equity gives 11% and debt gives 7% over this 20-year period, we have that the 70:30 portfolio will generate an average of 9.8%. In case equity and debt give 12% and 8%, then average portfolio returns will be 10.8%.

So now let’s answer the following questions:

Here are your answers:

  • For a retirement corpus of Rs 1 crore in 20 years, you need to invest in a SIP of Rs 12-14,000 per month if earning 8-10.8% returns on your 70:30 equity-debt portfolio.
  • For a retirement corpus of Rs 2 crore in 20 years, you need to invest in a SIP of Rs 24-27,000 per month if earning 8-10.8% returns on your 70:30 equity-debt portfolio.
  • For a retirement corpus of Rs 3 crore in 20 years, you need to invest in a SIP of Rs 36-41,000 per month if earning 8-10.8% returns on your 70:30 equity-debt portfolio.
  • For a retirement corpus of Rs 4 crore in 20 years, you need to invest in a SIP of Rs 48-54,000 per month if earning 8-10.8% returns on your 70:30 equity-debt portfolio.
  • For a retirement corpus of Rs 5 crore in 20 years, you need to invest in a SIP of Rs 60-68,000 per month if earning 8-10.8% returns on your 70:30 equity-debt portfolio.
  • For a retirement corpus of Rs 7 crore in 20 years, you need to invest in a SIP of Rs 84-95,000 per month if earning 8-10.8% returns on your 70:30 equity-debt portfolio.
  • For a retirement corpus of Rs 10 crore in 20 years, you need to invest in a SIP of Rs 1.20-1.36 lakh per month if earning 8-10.8% returns on your 70:30 equity-debt portfolio.

That’s how much you need to invest every month to retire at 50 when you begin investing at the age of 30

Please note that due to LTCG tax on equity investments, the actual amount that you need to invest will be slightly higher.

So if you are young and have not yet started investing for retirement, you should do it as soon as you can. It will help you accumulate a larger corpus or if you know the secret of financial freedom, then you can even have a very good shot at retiring early!

And once you decide to go ahead with this approach to invest regularly, just stick with it. It works. Also, keep monitoring your mutual fund portfolio closely. There will be times when returns won’t be acceptable. That’s fine. There will be good days and there will be bad days. But what’s important is for you to stick around.

Also, picking the right mutual funds for portfolio is very important.

But most people don’t just save for retirement. They have other financial goals as well. This means that they may not have enough money to save for retirement as suggested by our earlier calculations.

If that’s the case, then how do we get around that?

The answer lies in the scenario of Increasing SIP – Starting out with a much smaller SIP amount, investors can slowly increase monthly investments (as per their increasing income and comfort level) to achieve Rs 5 crore at a much more comfortable pace.

Here is what I am trying to say. You start small and invest more and more with each passing year.

Suppose your investment delivers 10% average returns and you have 20 years time horizon. For regular non-increasing SIP, you need to invest Rs 66-67,000 per month for 20 years to reach Rs 5 crore target

But what if you can’t start with Rs 66-67,000 per month. And what if as your income increases over the years, you to can slowly increase your monthly SIP by 5% every year?

How will that change the SIP amount then?

So, in the first year, you will have a SIP of Rs 46-47,000 per month instead of Rs 66-67,000 for the fixed non-increasing SIP. In the second year, the Rs 25-26,000 SIP will have to be increased by 5%, i.e. to about Rs 2300-2400 and so on every year till the 20th year.

To summarize, if your investments earn a 10% return and you have 20 years to save Rs 5 crore, you can take either of two options:

  • Invest Rs 66-67,000 every month continuously for 20 years via regular SIP
  • Start investing Rs 46-47,000 every month in the first year and increase this monthly SIP amount by 5% every year

And if you just wish to know how much money you can save up by investing a fixed amount in SIP every month, then you can use the links below:

So now that you know it is possible to reach your Rs 1-5 crore retirement goal in 20 years if you go about it in a planned manner, how can you make these numbers work for you?

You get yourself a financial plan.

To get yourself a well-thought-through detailed goal-oriented financial plan, that plans for all important life goals like children’s education, your retirement, house purchase, travelling, etc., you can consider taking professional Stable Financial Planning Service. If you are interested, then head to this page for more details about the Financial Planning Service. You will increase the probability of achieving your goals on time without stress.

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