Retirement planning takes a back seat in your 30s, when most people are preoccupied with their career advancement, family life, or home purchase. Yet, financial experts agree that this is the ideal decade to begin building a retirement corpus. The longer your money stays invested, the more powerfully compounding works in your favour. According to Suresh Mansharamani, Business Coach, Co-Founder Tajurba, the key question is not whether to plan, but how much to save each month to create a meaningful fund by the time you turn 60.
To get reasonable figures, we assume the following: age 30-60, working life of 30 years; average 12 per cent return per year, which is in the general range of historical performance of equity mutual funds in India. Even small monthly investments will accrue to stunning amounts in thirty years at this pace. For instance, if you wish to build a retirement fund of Rs 1 crore, you would need to set aside roughly Rs 5,000 every month. Stretching that to Rs 2 crore would mean saving Rs 10,000 per month. Ambitious professionals aiming higher, say Rs 5 crore or even Rs 10 crore, should be prepared to commit about Rs 25,000 and Rs 50,000 a month, respectively.
While these figures may look daunting at first glance, it is important to note that the total money you actually put in is far smaller than the final corpus. For example, someone investing Rs 5,000 per month for 30 years contributes only about Rs 18 lakh, yet ends up with nearly Rs 1 crore thanks to compounding. Similarly, a disciplined Rs 50,000 monthly contribution over three decades adds up to around Rs 1.8 crore in actual investment, but grows into Rs 10 crore by the time retirement arrives. This gap between contribution and outcome is the magic that only long-term compounding can deliver.
However, selecting a target corpus is never about picking a number that seems pretty. How much money you will actually need strongly depends on inflation. "A family that spends Rs 50,000 per month on household expenses today will require more than Rs 2 lakh per month at age 60, assuming inflation averages 5 per cent annually. To sustain that lifestyle for two to three decades after retirement, the corpus required may not be Rs 1 crore, but closer to Rs 1.5–2 crore or even more, depending on post-retirement returns," Mansharamani said.
The good news is that starting early significantly reduces the burden. Someone beginning at 30 can reach these figures with modest contributions, while delaying even by ten years can double the required monthly savings.
