Summary of this article
Start early: Delay sharply increases monthly SIP burden
Time over returns: Longer horizon matters more
Step-up SIPs: Lower starting amount, easier journey
A Rs 5 crore or Rs 10 crore retirement corpus means very different things at age 25 than it does at 45. The monthly SIP required changes sharply with age, and the cost of delay shows up clearly in the numbers. Using realistic return assumptions and a fixed retirement age of 60, this analysis by Outlook Money breaks down how much you need to invest every month starting at different ages to reach your target.
We have worked on the numbers based purely on time left for retirement, assumed returns of 12 per cent and 15 per cent, and different starting ages.
We will begin with a Rs 5 crore retirement corpus.
If you start investing towards your retirement while young, that is at an age of 25 years old, with 35 years to retire, you need to invest Rs 7,800 per month at 12 per cent returns. At a higher return assumption of 15 per cent, this drops sharply to Rs 3,400 per month. At age 30, with 30 years in hand, the required SIP rises to Rs 14,300 at 12 per cent and Rs 7,200 at 15 per cent.
The gap widens as time reduces. At age 35, you need Rs 26,600 per month at 12 per cent and Rs 15,400 at 15 per cent. By age 40, with just 20 years left, the SIP jumps to Rs 50,600 at 12 per cent and Rs 33,400 at 15 per cent. If you start at 45, the monthly requirement becomes steep at Rs 1,00,000 at 12 per cent and Rs 74,800 at 15 per cent.
This data clearly shows the benefit of starting early. An investor who begins early can reach the same desired corpus by investing way lower than an investor who begins later in his or her life.
Let’s look at the same exercise for a Rs 10 crore target for retirement.
At 25, the monthly SIP required is Rs 15,550 at 12 per cent and Rs 6,800 at 15 per cent. Starting at 30 increases this to Rs 28,600 and Rs 14,500 respectively. At 35, the numbers rise to Rs 53,200 at 12 per cent and Rs 30,800 at 15 per cent.
With only 20 years left at age 40, you need to invest Rs 1,01,000 per month at 12 per cent and Rs 66,800 at 15 per cent. Starting at 45 makes the target significantly heavier at Rs 2,00,200 at 12 per cent and Rs 1,49,600 at 15 per cent.
This is where step-up SIPs make a visible difference. Step-up SIP isa strategy of starting with a small sum and continuing to increase the investment amount at a regular interval by a pre-decided fixed amount or percentage.
Assuming a 5 per cent annual step-up in SIP amount, the starting monthly investment comes down meaningfully. For a Rs 5 crore target, a 25-year-old needs to start with just Rs 5,800 at 12 per cent or Rs 3,050 at 15 per cent. At 30, the starting SIP is Rs 10,800 at 12 per cent and Rs 6,300 at 15 per cent.
At 35, it becomes Rs 20,300 and Rs 13,100. At 40, the required starting SIP is Rs 39,500 at 12 per cent and Rs 28,300 at 15 per cent. Even at 45, the starting amount reduces to Rs 81,000 and Rs 64,100 respectively.
For a Rs 10 crore goal with a 5 per cent step-up SIP, a 25-year-old needs to begin with Rs 11,600 at 12 per cent or Rs 6,050 at 15 per cent. At 30, this moves to Rs 21,500 and Rs 12,500. At 35, it is Rs 39,200 and Rs 26,200. At 40, the starting SIP is Rs 80,000 at 12 per cent and Rs 56,500 at 15 per cent. At 45, it stands at Rs 1,62,500 and Rs 1,29,000.
The data clearly shows one thing: time and step-up matter far more than chasing big jumps later. However, while this data gives a rough estimate of how much to invest to reach the target retirement corpus, each individual’s needs and financial situation would be different. It is always better to consult a financial advisor and work on creating a solid retirement plan and save towards it with discipline to lead a financially stable life during your golden years.
