SIP & One-time Investment For Retirement Planning: How you can get Rs 75,000 monthly income at retirement if your age is 25, 30, 35, or 40 years?
Retirement Planning through SIP and One-time Investment: If one wants to get an inflation-adjusted monthly amount of Rs 75,000, they should plan in advance and invest monthly or one time. Such an amount can help them achieve financial stability at a retirement stage.
Retirement Planning through SIP and One-time Investment: Is your monthly expenditure Rs 35,000, and do you expect the same amount at retirement, or do you want to upgrade your lifestyle and spend more? This can be your call based on the ambitions and quality of life you aspire to live in your retirement days. But the preparation of it should be started early. It can be done through investing and creating a retirement corpus or creating income sources. If one wants to do it through investment, they need to plan according to their age and also the age by when they require this amount. The number of years, expected returns, and the inflation rate are other factors to calculate the money required for the future. Know the factors one needs to consider for retirement planning and what will be the monthly systematic investment plan and one-time (lump sum) investment to get Rs 75,000 a month income if your age is 25, 30, 35, or 40 years.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
Why is retirement planning necessary?
Everyone aspires to live their life freely, where they don't have to depend on others for their daily expenses. For that, they must have a retirement corpus or income sources that generate enough passive income to help them live independently.
How much money is required for such retirement planning?
This depends on what type of life one wants to live post retirement. Do they want to have the same expenses that they have right now, or do they want to upgrade their lifestyle? They need to ask such questions from them. The retirement planning can be done according to it.
Why age is factor?
When one plans for retirement, they need to set a retirement age for themselves, for how many years they want a retirement corpus, and for how long they can contribute to create a corpus.
What inflation is a factor
The value of money decreases with time because of inflation. So, if you want to get Rs 75,000 monthly at retirement, the calculation should be based on the present value of money, not the future, because in a few years down the line, the value of Rs 75,000 may be equal to just Rs 25,000 in today's terms.
How one can create retirement corpus
They may create it through investment. They can make a daily, weekly, monthly, quarterly, half-yearly, and yearly investments, or they may go for a one-time investment. The return from their investment should be enough to beat inflation and help them achieve their retirement goals.
What will we calculate?
For our story, we will calculate the monthly systematic investment plan and one-time (lump sum) investment to get Rs 75,000 monthly income if your age is 25, 30, 35, or 40 years.
Calculation conditions
We will take the retirement age as 60 years and life expectancy as 80 years. The pre-retirement annualised return will be 12 per cent and the post retirement annualised return will be 6 per cent. The inflation rate will be 6 per cent. We are assuming that all of them have 0 corpus for retirement.
Age 25: Monthly SIP, one-time investment required to get Rs 75,000 a month
The monthly expenses at 60 will be Rs 5,76,457, estimated corpus required will be Rs 13,83,49,680. The investment years will be 35 years. Estimated one-time investment required will be Rs 26,20,278, and the estimated monthly SIP investment required will be Rs 21,300.
Age 30: Monthly SIP, one-time investment required to get Rs 75,000 a month
The monthly expenses at 60 will be Rs 4,30,762, estimated corpus required will be Rs 10,33,82,880. The investment years will be 30 years. Estimated one-time investment required will be Rs 34,50,706, and the estimated monthly SIP investment required will be Rs 29,288.
Age 35: Monthly SIP, one-time investment required to get Rs 75,000 a month
The monthly expenses at 60 will be Rs 3,21,890, estimated corpus required will be Rs 7,72,53,600. The investment years will be 25 years. Estimated one-time investment required will be Rs 45,44,313, and the estimated monthly SIP investment required will be Rs 40,710.
Age 40: Monthly SIP, one-time investment required to get Rs 75,000 a month
The monthly expenses at 60 will be Rs 2,40,535, estimated corpus required will be Rs 5,77,28,400. The investment years will be 20 years. Estimated one-time investment required will be Rs 59,84,517, and the estimated monthly SIP investment required will be Rs 57,778.
Things to learn
In all 4 examples, you can see that as age is increasing, the required corpus is decreasing, but on the other hand, the required monthly SIP amount and one-time investment are also increasing. So, the benefit of starting retirement planning is that you can create a larger orpus with a smaller amount compared to a person who starts late.