The age group of 30-40 is when people are no longer too young to live carefree nor too old to give up on their money goals. And one of the goals that many have is to achieve a net worth of Rs 1 crore (at least) and be free forever.
The actual figure may vary for many, but nevertheless, let’s choose one of the popular ones to take our discussion forward: Rs 10 crore.
Say you are in the age bracket of 30 to 40 and want to have Rs 10 crore by the time you hit 60. Whether Rs 10 crore will be enough or not is a separate (but important) discussion altogether when you consider inflation’s uncanny knack of eroding the value of your money.
But still, retiring with Rs 10 crore is a good solid goal to begin with. You can, later on, tweak the target as you move ahead. So, let’s see how you can accumulate Rs 10 crore by your retirement.
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The answer depends on a few factors:
>> Number of years available to invest – If you are 30, then you have 30 more years to invest. If you are already 40, you have 20 years of runway.
>> Expected returns on your investment – Depending on your chosen asset allocation, your portfolio returns will vary. If you have more allocation towards debt then you will earn less returns than someone who has more equity allocation in the portfolio via the right categories of equity funds.
Now let’s see the answers.
Depending on your age and your investment style – conservative, balanced or aggressive, the monthly investment you need to make can range from Rs 30,000 to Rs 1.7 lakh to reach a target of Rs 10 crore.
Age 30: How to reach Rs 10 crore in 30 years
>> If you are a conservative saver, who invests primarily in debt, then assuming 8 percent average returns for 30 years, you need to invest Rs 68,000-Rs 69,000 monthly.
>> If you are a balanced investor, who invests equally in equity and debt, then assuming 10 percent average returns for 30 years, you need to invest Rs 46,000-47,000 monthly.
>> If you are an aggressive investor, who invests primarily in equity, then assuming 12 percent average returns for 30 years, you need to invest about Rs 30,000-31,000 monthly.
Age 35: How to reach Rs 10 crore in 25 years
>> If you are a a conservative saver, then assuming 8 percent average returns for 25 years, you need to invest about Rs 1 lakh–Rs 1.1 lakh monthly.
>> If you are a balanced investor, then assuming 10 percent average returns for 25 years, you need to invest about Rs 77,000-78,000 monthly.
>> If you are an aggressive investor, then assuming 12 percent average returns for 25 years, you need to invest about Rs 55,000-56,000 monthly.
Age 40: How to reach Rs 10 crore in 20 years
>> If you are a conservative saver, then assuming 8 percent average returns for 20 years, you need to invest about Rs 1.6 lakh-Rs 1.7 lakh monthly.
>> If you are a balanced investor, then assuming 10 percent average returns for 20 years, you need to invest about Rs 1.3 lakh-Rs 1.4 lakh monthly.
>> If you are an aggressive investor, then assuming 12 percent average returns for 20 years, you need to invest about Rs 1 lakh-Rs 1.1 lakh monthly.
Note: The actual investment figures will be slightly higher if you consider long-term capital gains taxation, which has not been considered here for simplicity.
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You would have noticed that the earlier you start investing, the longer the period you have available, and as a result, you are required to invest lower amounts to reach the target. Also, this is a no-brainer, but the higher returns your investments generate, the less you need to invest.
Another thing to note is that these figures assume you will continue to invest the same amount each year for 20-30 years, which may not always be the case. As your income increases, you will have more surplus to invest. That’s the ideal way to approach your investment.
You need to top-up your investment every year or at least every few years. So, you will invest more each year, if you keep increasing your investments at least in line with the increase in your income. And this is what the idea of ‘increasing SIP’ is all about. It also helps you reach your target goal faster as you will be investing higher amounts than required.
And don’t worry if you are late and haven’t started till now. It’s never too late to start. Begin and do what you can. And stick to it till you reach 60. You will be surprised (in a good way).
Also read: In your 40s and haven’t saved enough?
Where to invest for 20-30 years?
Given the long investment horizon of 20+ years in this discussion, the best asset class to invest in is equities. I am not saying you invest 100 percent in equities. But if you can, then try to invest a major part in equities.
Equities have a long proven track record of delivering inflation-beating returns that most debt instruments cannot offer. So being in equity for the long term helps your goal of wealth creation.
And, as I mentioned earlier, we should not forget inflation. Rs 10 crore looks like a huge amount today. But 20 years down the line, it will not be of the same value as it is today.
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So, if you plan to save for retirement, it is better to do some proper number crunching to figure out what is the right number instead of randomly picking a target of say Rs 5-10 crore.
If you can’t find the right number and want to know the correct SIP amount for your goals, then reach out to SEBI-registered investment advisors. That way, you will begin your financial journey well and also won’t get a shock later in life.
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