Retirement corpus: Rs 400 a day from day one of service can help you achieve your goal

Possessing  a few crores on the day of retirement is a dream for many. Interestingly, it is quite possible provided an individual remains focused throughout one’s working life.

Money9 gives you a simple example of how to accumulate a corpus of a few crores at retirement which can help you lead a secure and peaceful life after years of hard work.

If anyone can contribute as small as Rs 400 per day from the beginning, a corpus of at least Rs 10 crore can wait for you when you reach the age of 60.

The math

For instance, if a person starts his/her working life at the age of 25 years, he or she has to contribute Rs 400 a day to that kitty as it is not a very ambitious amount.

It works out to Rs 12,000 per month. From the very first month of service the person should invest regularly till the age of 60 years.

The investment avenues should be instruments that offers a return of about 12-13%.

Experts suggest the ideal instruments for such purpose are hybrid or balanced mutual funds or equity-based funds.

Balanced funds usually offer a return of 12-13% on average. On the other hand, equity-based funds give a return of around 15-16% minimum in the long run.

Let us consider that the person would invest in a hybrid fund that would give a return at the rate of 13%.

Rs 400/day, or Rs 12,000/per month, for a period of 35 years would give one a return of Rs 10.2 crore.

Over the period the person would be investing a nominal sum of Rs 50.5 lakh and he/she would earn another Rs 9.7 crore.

If one has the sustained capacity to take on higher risk for such a long period, the returns can be far higher. An equity-based fund can offer a minimum 15% return and after 35 years one can net Rs 18 crore.

The nominal amount that the individual would invest is Rs 50.5 lakh but the returns would be far higher than a balanced fund.

Expert views

Experts suggest that SIP contribution in mutual funds is a safe mode of investment. The burden does not become too heavy at any point of time.

“The SIP option is a nice option. But since it would take place over a period of 35 years, one should have the sustained risk appetite. Everything should be in place according to the example for one to expect these sort of returns,” says Nilotpal Banerjee, a certified personal finance planner.

“A long period of three decades would involve three market cycles. SIP modes of investments are quite safe,” says Nilanjan Dey, director, Wishlist Capital Advisors.