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SIP it for a large retirement corpus
Published On , 16 Sep 2016 By ET Wealth
The changing nature of our society and family set up is forcing every person to seriously think about how to meet financial needs after retirement. Inflation is one of the biggest threats to meeting post-retirement financial needs. So one should invest in products which can beat inflation during the accumulation phase (during the working life), and have a large corpus at retirement so that he is financially free during the retired life.
CALCULATORS SIP calculators calculate how much money you can accumulate over the long run. The relevant inputs you need to put in are:
Expected rate of return
The number of years you are willing to invest
Here are a few steps to build a retirement corpus using the systematic investment plan (SIP) route
Calculate your monthly household expenses
Use rate of inflation (30-year average is around 8%)
Use a compound interest calculator on the net to calculate your monthly expenses when you retire, say at 60
You can now calculate the annual corpus needed
Post-retirement life expectancy is about 20-25 years
Use the rate of inflation to see how your annual expenses will rise from the 61st year
It's safe to assume an average annual returns from equities between 12-15%
Use this rate of return in SIP calculators on the net to arrive at how much you need to invest monthly to arrive at this amount
Maintain some buffer
Start an SIP keeping in mind your age, risk profile etc.
Similarly you can use healthcare cost inflation at about 12-15% to arrive at a corpus to take care of medical costs post retirement
Then use the SIP route to create another corpus for your post-retirement healthcare needs
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