Beginning your retirement planning early can lead to significant financial benefits. Rahul Bhagat, CEO of DSP Fund, explained in an interview with CNBC-TV18 that investing ₹10,000 monthly in the National Pension System (NPS) from age 25 could accumulate a corpus of ₹3.4 crore by retirement. He emphasized that starting early secures financial independence in old age.
How Early Investment Impacts Retirement Corpus
Rahul Bhagat highlighted the advantage of early investment. If you invest ₹10,000 every month for 25 years with an expected annual return of 10%, your corpus would be around ₹1.2 crore. However, extending this investment period by 10 more years, making it 35 years total, could boost the corpus to approximately ₹3.4 crore even with only ₹12 lakh extra invested during this decade.
Bhagat attributed this substantial increase to the power of compounding. The returns generated over the years themselves begin to earn returns, multiplying the growth of the invested corpus. He clarified that these figures are simplified projections, as actual market returns can vary and have no guaranteed rate.
Why Increasing Investment Over Time Matters
Starting early is crucial but alone not enough. According to Rahul Bhagat, adjusting your investments in line with growing income also plays a significant role. If an investor increases their monthly contribution by 5% every year, the retirement corpus could vastly improve due to this gradual increment combined with compounding.
Younger investors typically prefer equity investments because they have a longer horizon to absorb market fluctuations. Bhagat explained that individuals in their 20s and 30s benefit from staying invested in the stock market where short-term volatility has less impact over decades. Even if the market dips occasionally, it usually recovers during the long tenure.
An often overlooked aspect is the cost of investment. Bhagat used an example where a 30-year investment with an annual gross return of 10% could result in a ₹2 crore corpus if charges are 0.1% annually. But if charges rise to 1%, the corpus drops to ₹1.7 crore, causing a potential loss of ₹33 lakh due to higher fees.
This highlights the importance of carefully considering fund expenses while investing. Monitoring and minimizing charges ensures that more returns stay invested and grow over time. Bhagat’s advice underlines the key elements of retirement planning: timely start, gradual increase in contributions, equity allocation for youth, and attention to costs.
These principles apply directly to the National Pension System, a government-backed scheme aimed at retirement savings. For those beginning their investment journey at 25 with consistent monthly contributions, NPS can serve as a valuable tool to build a substantial retirement corpus.
In conclusion, early and disciplined investment in NPS combined with awareness of compounding, asset allocation, and cost management can greatly improve financial security in old age.
