Retirement Planning : The sooner you start planning for retirement, the better it is. But sometimes people delay starting this important task. Or their circumstances do not allow it. If you are also among those people who have not been able to start saving and investing for retirement even after crossing the age of 40, then do not worry. If you start saving and investing properly even at the age of 45, then you can create a good retirement corpus in the next 15 years i.e. by the age of 60. For this, you will have to adopt the investment strategy of Step Up SIP. Also, due to starting late, you will have to be ready to save and invest a larger part of your income. For this, you may also have to cut down on your expenses. But despite starting late, if you want to live a comfortable life after retirement, then you will have to do some extra hard work.
Preparing for retirement in 15 years
If you are starting to build a retirement corpus at the age of 45, here are some things you need to follow to build a sufficient fund:
1. Start investing 30% of your salary every month in flexi cap or multicap equity mutual funds through SIP.
2. Increase your investment by 5% every year by following the step up SIP strategy.
3. Transfer your corpus to a 50:50 equity-debt scheme after retirement.
While planning to retire in 15 years, it has been estimated that the average annual return of your equity mutual funds will be 12% and due to inflation your expenses may increase at the rate of 6% annually. Apart from this, the 50:50 equity-debt scheme in which you will invest after retirement will give you a return of 10% every year. You can see the calculation of how your retirement corpus will be accumulated in 15 years by following these conditions here:
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Calculation of retirement plan
- Age : 45 years
- Monthly Income: Rs 70,000
- Monthly SIP at 30% of income: Rs 21,000
- Annual increase in Monthly SIP: 5%
- Estimated annual return on SIP in equity fund: 12%
- Total investment in 15 years: Rs 54,37,798
- Return on investment in 15 years: Rs 82,76,781
- Total Fund Value after 15 years: Rs 1,37,14,579 (Rs 1.37 crore)
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In 60 years you will have a fund of Rs 1.37 crore
According to the above calculation, when you retire at the age of 60, you will have a fund of about Rs 1.37 crore. If you invest this fund in a 50:50 equity-debt scheme and get a return of about 10% per annum, you will get around Rs 13,71,457 per year. If you divide it into 12 months, you will get around Rs 1.14 lakh every month, which should be enough to meet your expenses after retirement.
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If your average monthly expenditure is currently around Rs 45,000, then at a 6% inflation rate, its value after 15 years will be around Rs 1.07 lakh. Accordingly, the monthly income of Rs 1.14 lakh from the above-mentioned plan should be sufficient for your post-retirement expenses. To make this retirement plan successful, you will have to follow discipline in saving and investing. Only then will you be able to accumulate sufficient corpus for retirement in 15 years.
