Factors That Can Impact Your Retirement Corpus And What Should You Do To Avoid The Impact

How much retirement corpus will be sufficient for you? Well, you may decide the size of your retirement corpus based on factors such as the expected inflation rate, your expected lifestyle, post-retirement goals, etc. Once you have decided on the required size of your retirement corpus, you have to plan your investment to get closer to your goal. However, sometimes the plan may not go exactly as you would have thought and a deviation may happen. Such deviation may threaten the size of the corpus that you may be able to build for your retirement. Let’s check out some of the deviations that may happen when you invest towards building a retirement corpus.

How Does Deviation Impact Your Retirement Corpus?

Details 

Original Plan case-I case-II case-III

Deviation: 20% lower return 

Deviation: 20% less invested 

Deviation: 20% reduction in investment period

Planned Monthly Investment 10000 10000 8000 10000

Expected Return on Investment (Pa) 12% 9.60% 12% 12%

Investment Period 25 years 25 years 25 years 20 years

Retirement Corpus at the end of tenure Rs 1.90 Cr Rs 1.25 Cr Rs 1.52 Cr Rs 99.91 Lac

Rs 65 Lac less corpus Rs 38 Lac Less corpus Rs 90.1 Lac Less corpus

In the table, three deviation scenarios are presented. Case I shows the impact on the corpus if the return on investment is reduced by 20 per cent. Case II shows the impact on the corpus if the amount that has to be invested every month is reduced by 20 per cent. Case III shows the impact on the corpus if the total investment period is reduced by 20 per cent. In all the scenarios, the retirement corpus falls significantly. What’s the solution if you get into a situation similar to the cases discussed here?

What Should You Do If There Is A Threat Of Deviation In Your Retirement Corpus?

To compensate for the deviation, you have to adjust between return, size of investment and tenure depending on the situation. Here are some steps that can be useful if there is a deviation:

-          If you can’t invest adequately

Focus on a higher return on investment

Increase the tenure

Or, apply both a & b

-          If the return on investment is lower

Increase the tenure

Invest a higher amount

Or, apply both a & b

-          If you want to retire early i.e., total tenure of investment is reduced

Focus on a higher return on investment

Invest a higher amount

Or, apply both a & b

A delay in recognising the deviation can cause severe damage to your planned retirement corpus. So, it is important to timely recognize the deviation in factors that may impact your retirement corpus so that it can be managed easily.

The author is an Independent Financial Journalist