Low income shouldn’t be perceived as a hindrance to building a big retirement corpus. With the right plan and execution, you can create a big corpus.
How you dream of your retirement may motivate you to put adequate effort into increasing your income to build a sufficient corpus for your old age. However, instead of waiting for your income to grow, you must take the right steps towards achieving the target retirement corpus. With the right approach and smart move, you can get the desired retirement corpus despite having a low income. Here are some important steps that you may take to build the desired retirement corpus.
Start Investing Early
The longer you invest, the bigger the corpus you can create for retirement. Starting the investing process early in your career allows more time for the magic of compounding to work on your portfolio. A longer investment period with compounding can be more efficient than a shorter one, even if the investment size is a little higher in the latter case. For example, if you invest Rs 1 lakh with a 10 per cent annual rate of interest (ROI) for 30 years, then you’ll get a corpus of Rs 19.36 lakh at the end of the tenure.
On the other hand, if you invest double the amount, i.e., Rs 2 lakh for 20 years with 10 per cent ROI per annum, you’ll get a corpus of Rs 14.42 lakh at the end of the tenure. So, by starting the investment process early in your career, you can easily create a bigger corpus for your retirement compared to starting an investment with a higher amount later in your life.
Invest Regularly
Investing regularly helps you stay disciplined and avoid unnecessary expenses. So, you can continuously save money and invest for your retirement. Regular investment helps in Rupee cost averaging and compounding, which further helps the portfolio to grow faster. You can invest through a systematic investment plan (SIP) to build a bigger corpus in the long term.
Choose Your Investment Wisely
How much you invest is important, but at the same time, where you invest and for how long are also important factors that determine the size of the corpus you’ll be able to create. We have already noted the impact of the investment period on the maturity amount. Where you invest determines the return you’ll get on your investment. Choosing the right investment instruments at various stages in your life will help you reduce the risk and get an attractive return to build a big corpus for your retirement. For example, at an early stage in your life, you can take higher risk, so investing in equities can help you get a good return and gradually, as you get older and close to your retirement, you can switch to low-risk investments such as debt assets to reduce the risk and protect your corpus from losses.
So, if you have a low income, you don’t need to worry and focus on three mantras, i.e., just focus on regular investment, start investing early and choose the right instrument to help you get closer to your planned retirement corpus.
The author is an independent financial journalist.