SIP in Retirement Planning: Want to get Rs 85,000 monthly income at retirement? Know how much you need to invest at 25, 30, and 35 years of age
SIP in Retirement Planning: If you target an amount—monthly or yearly—for your retirement, you need to know what the inflation-adjusted value of that amount will be at the retirement age. According to that, you can plan your investments for retirement.
SIP in Retirement Planning: Everyone seeks a comfortable retirement where they can feel financially free, have a regular passive income, and don't have to depend on others to meet their daily expenditure. But when they are planning their retirement, important things to know are the inflation-adjusted corpus they need at retirement, the pre-retirement investment amount, and expected pre- and post-retirement annualised returns. Since inflation will be a key factor, your retirement corpus should not end during your life. Know important factors to build a retirement corpus, and what your investments should be to get an Rs 85,000 monthly amount at retirement if your current age is 25, 30, or 35 years.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
What is retirement corpus?
Retirement corpus is the amount you need at retirement. The amount should be based on your expenditure at that stage and for the amount you need for the rest of your life.
What should be inflation?
Inflation is not static. It keeps changing. So, a standard inflation rate can be decided. It can be 6 or 7 per cent.
How much investment is necessary?
Your current age, inflation, the retirement age, and life expectancy should be the factors to decide the amount. The investment types can be a mix of market- and non-market-linked. Since the return and interest rate will keep changing, the investor needs to chase a standard annualised rate of return that can help them accomplish the retirement corpus goal in the long term.
Calculations for story
Here, we are taking Rs 85,000 as the inflation-adjusted target amount. Ages are 25, 30, and 35 years. We will take the retirement age as 60, and the life expectancy as 80 years. We will calculate the corpus required in either case, the monthly SIP amount, and the lump sum amount required to chase the target.
What will be rates of return?
We are keeping a 12 per cent as the pre-retirement rate of return and a 6 per cent as the post-retirement return. The inflation rate will be 6 per cent.
Required corpus to get Rs 85,000/month for 25 years at 60?
The value of Rs 85,000 at 60 for the investor will be Rs 6,53,317. It means the person needs Rs 78,39,804 a year at that stage. The estimated corpus for such a person will be Rs 15,67,96,080.
What will be the SIP amount to achieve that target?
The estimated monthly SIP amount to achieve that target will be Rs 24,140.
What will be the lump sum amount to achieve that target?
The estimated lump sum amount to achieve that retirement target will be Rs 29,69,645.
Required corpus to get Rs 85,000/month for 30 years at 60?
The estimated value of Rs 85,000 at 60 for the investor will be Rs 4,88,197. It means the person needs an estimated Rs 58,58,364 a year. The estimated required corpus for the person will be Rs 11,71,67,280.
What will be the SIP amount to achieve that target?
The estimated monthly SIP amount to achieve that retirement corpus target will be Rs 33,193.
What will be the lump sum amount to achieve that target?
The estimated lump sum amount to achieve the retirement goal will be Rs 39,10,801.
Required corpus to get Rs 85,000/month for 35 years at 60?
The estimated value of Rs 85,000 at 60 for the investor will be Rs 3,64,809, or an estimated Rs 43,77,708 a year. The estimated required corpus for the person will be Rs 8,75,54,160.
What will be the SIP amount to achieve that target?
The estimated monthly SIP amount to achieve that retirement corpus target will be Rs 46,139.
What will be the lump sum amount to achieve that target?
The estimated lump sum amount to achieve the retirement goal will be Rs 51,50,226.