New Delhi, India
Starting investments early is crucial for achieving financial independence after retirement. In particular, investing through a Systematic Investment Plan (SIP) in mutual funds over the long term can provide the benefit of compounding. This is why even a small monthly SIP started at a young age can help build a substantial corpus over the long term.
If an investor aims to build a corpus of around ₹2 crore by the age of 60, the monthly SIP required can vary significantly depending on the age at which the investment begins. According to the given estimates, an investor who starts at the age of 25 can invest for 35 years and move closer to this target, while those who start later may need to invest a much higher amount every month.
How Much Should You Invest If You Start at 25?
If a person starts an SIP at the age of 25 and continues investing until the age of 60, they will have around 35 years for their investment to grow.
- Investment period: 35 years or 420 months
- Estimated monthly SIP: Around ₹3,100
- Total investment: Around ₹13.02 lakh
- Target: Around ₹2 crore
Over a long investment period, the effect of compounding can become significant. In this estimate, the potential returns generated by the market could account for a substantial portion of the final corpus compared with the amount actually invested by the investor.
Starting at 30: How Much Will You Need to Invest?
If investment begins at the age of 30, the investor will have 30 years until reaching 60. This means the investment period will be five years shorter.
- Investment period: 30 years or 360 months
- Estimated monthly SIP: Around ₹5,700
- Total investment: Around ₹20.52 lakh
- Target: Around ₹2 crore
This example shows that even a delay of just five years can significantly increase the monthly investment required to reach the same financial goal.
Starting at 35: Monthly SIP Requirement Increases
If investment begins at the age of 35, the investor will have only 25 years until the age of 60. As a result, a higher monthly investment would be required to achieve the same target.
- Investment period: 25 years or 300 months
- Estimated monthly SIP: Around ₹10,500
- Total investment: Around ₹31.50 lakh
- Target: Around ₹2 crore
This clearly shows that as the investment period becomes shorter, the monthly amount required can increase rapidly.
Starting at 40: How Much Would You Need to Invest?
If someone starts investing at the age of 40 with the goal of building a ₹2 crore retirement corpus, they will have only 20 years until the age of 60.
- Investment period: 20 years or 240 months
- Estimated monthly SIP: Around ₹20,000
- Total investment: Around ₹48 lakh
- Target: Around ₹2 crore
Therefore, there can be a substantial difference in the monthly investment requirement between starting at the age of 25 and starting at the age of 40.
The Earlier You Start, the Greater the Potential Benefit of Compounding
These figures show that in retirement planning, it is not just the amount invested that matters; time is equally important. Starting at a younger age gives investments more time to grow and allows compounding to work over a longer period.
However, it is important to remember that mutual fund investments are subject to market risks. No SIP can guarantee that an investor will receive exactly ₹2 crore in the future. Actual returns will depend on market performance, the mutual fund scheme selected, the investment period and other factors.
Therefore, while setting a ₹2 crore retirement target, it is better not to rely solely on an assumed rate of return. Inflation, investment risk and future financial requirements should also be considered while preparing a financial plan. Increasing the SIP amount periodically, according to one’s financial capacity, can also help strengthen the retirement corpus.
Conclusion: Starting with a small amount at the age of 25 can provide the advantage of a longer investment horizon. On the other hand, delaying investments can mean that a significantly higher monthly amount is required to achieve the same financial goal. Therefore, while planning for retirement, starting early and investing regularly can be important factors in building a substantial corpus.
