SEBI registered Investment advisor (RIA) with Registration number – INA 000000342.

When to plan for Retirement?

My friend Suresh is not ready to plan for his retirement. At age 40, he still feels that he has 20 more years to his retirement. For him the top priorities are children education and their marriage and want to plan for retirement only after these priorities.

Suresh is the representative of the large number of people who believe that retirement planning can be delayed.

Retirement Planning

Will you get a Retirement Loan at age 60?

As a SEBI registered Investment Adviser and a Certified Financial Planner, I feel Retirement Planning is the top priority for all of us. This is because you can plan your children education through an education loan. Even you can manage their marriage through a personal loan. But no bank will give you a retirement Loan in your golden years!

How much you require for retirement?

Suppose you are aged 25 and want to provide an amount of 30,000 per month in today’s value for your retirement at age 60.With 6% inflation, the amount required will be 2.30 Lakhs per month! Assuming a retired life of 20 years, the amount required for this cash flow for the next 20 years will be 4.55 Crore. In other words, if you have 4.55 Crore at age 60, you can invest it in debt instruments offering 2% return above the inflation rate and maintain your standard of living pos retirement.

How to accumulate 4.55 Crore before retirement?

When you have 35 years to retirement, it is easy to accumulate this amount. Let us see how much will come from your PF account?

If your monthly contribution to PF is 3200 (your contribution and the contribution by your employer) you can expect the amount to grow to around 1.34 Crore in the next 35 years. I have assumed a 7% annual increase in your PF contribution and assumed an interest rate of 7% throughout the term. You can invest Rs.5000 in equity mutual funds through SIPs for the next 35 years. Assuming annualized return of 12%, you will have around 3.21 Crore in this account.  These 2 will contribute 4.55 Crore for your retirement.

Why people miss the bus for retirement planning?

But why most of the people are not saving enough for their retirement? Please read on to know the reason.

If you delay the investment of 5000 by 5 years and start it at age 30, how much difference it make? Instead of 3.21 Crore, you will have only 1.75 Crore. The difference in accumulation is 1.46 Crore!

Please see the following chart to see the difference in accumulation if you delay the investment of 5000.

Age at starting SIP Monthly SIP Total amount invested till age 60 Accumulation at age 60
25 5000 21 Lakhs 3.21 Crore
30 5000 18Lakhs 1.75 Crore
35 5000 15 Lakhs 94Lakhs
40 5000 12Lakhs 49Lakhs
45 5000 9Lakhs 25 Lakhs
50 5000 6Lakhs 11 Lakhs
55 5000 3Lakhs 4 Lakhs

Power of compounding – why to start early?
If you delay by 10 years and start SIP at age 35, your accumulation will be only 94 Lakhs. In reality, most of us start thinking about retirement at age 40 and will end up with an accumulation of 49 Lakhs!  Or we have to invest much more.

Please note the following chart to understand the power of compounding and the effect of early investing. The chart shows the accumulation of amount invested in each of the 5 year blocks from age 25 to 60. The investment of 5000 per month for 5 years will be 3 lakhs. Please see the growth of these 3 lakhs in different blocks.


Amount invested in 5 years

Value at age 60

Percentage contribution to the total accumulation of 3.21 Crore



1.46 Crore




81 Lakhs




45 Lakhs




24 Lakhs




14 Lakhs




7 Lakhs




4 Lakhs


The 3 lakhs invested in the first 5 years is growing to 1.46 Crores at age 60 and this contributes 46% of the total accumulation! The investment of 3 lakhs in the next 5 years is growing to 81 Lakhs and this contributes 25% of the total accumulation. In other words the contribution in the first 10 years contributes to 71% of the total accumulation.  So, if you delay the investment to age 35, you can reach only 29% of the targeted amount. What about starting at age 40?

After seeing these calculations, Suresh is tensed and is now ready for his retirement planning. Here is the retirement solution for late starters like Suresh.

He wants to provide 30,000 per month for his retirement. He is now 40 and after 20 years, the value of 30,000 will be 96,000 with 6% inflation. To provide an inflation adjusted monthly withdrawal for the next 20 years, he requires around 1.9 Crore. He will get around 40 Lakhs from his PF account on his retirement. To create the shortage of 1.5 Crore, he should invest around 15,000 in SIPs. Since he is saving for children education and marriage, it is difficult for him to invest 15,000 per month for retirement.

The other option is to go for an increasing SIP. Now he can start a monthly SIP for 10,000 and increase it by 8% every year for the next 20 years to create 1.5 Crore. For late starters, increasing SIP will be a better option for retirement planning.

Are you in your 40s and still waiting for retirement planning?


  • JeetandarOjha Posted December 17, 2013 12:23 pm

    Dear Malvin

    Thanks for the awesome article. Its would help youngsters to save early.. for tension free retirement.

    Jeetu Ojha

  • Harish Posted December 18, 2013 1:35 pm

    Thanks for good information regarding retirement…

    Like all your post..

    thank you

  • Krishna Posted July 28, 2015 4:10 pm

    isnt the inflation rate at 6% is too much on conservative side

    • Melvin Joseph Posted September 25, 2015 4:16 pm

      For a very long term goal like 15 years and above 6% inflation is realistic.

  • Rishika Posted April 13, 2017 5:30 pm

    This was really an informative article. The earlier we start planning for retirement the better results we get at the time of retirement.

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