I am 34 years old and I want to invest for my retirement. I earn ₹1.5 lakh per month and I am unmarried. My monthly expenses are ₹60,000. I don’t have any dependants or long-term goals. How should I determine how much money I will need as my retirement corpus? Also, suggest different avenues to invest in. I can invest up to ₹50,000 every month.
Prima facie your savings capacity is of ₹90,000 per month. It is always recommended to maximize your savings. But as you currently want to save ₹50,000 per month and assuming the retirement age to be 60 years, you have a potential to save for 26 years and for the said period, principal accumulation will be ₹1.56 crore and at a 12% average earnings rate, the corpus will become ₹10.7 crore. While the absolute amount appears to be large, however, after factoring inflation at 6%, it equals to ₹2.35 crore, which will take care of your monthly requirements.
As your investment horizon is long term, consider equity as an asset class. Within equity, you can consider mutual funds as your investment vehicle. You can have a combination of large-cap, multi-cap and mid-cap mutual funds along with a debt component, which could be a combination of Public Provident Fund and short-term debt funds.
Surya Bhatia is managing partner of Asset Managers. Queries and views at firstname.lastname@example.org