You pay a heavy price by waiting to start investments: this post shows the effects of every year of delay

We have already covered

• how and why to set a goal
• how to get asset allocation for a single goal
• how to get SIP amount for a single goal
• how to get SIP amount for a goal with multiple payments
• how to get SIP amount for traditional retirement

We will extend the concept developed while calculating for a traditional retirement goal and show what happens when investments are delayed. There may be many reasons for starting investments late like

• not calculating the cost of retirement goal (read this post)
• not having an understanding of how to start goal-based investments (start here)
• always waiting for the right time to enter markets
• thinking planning for goals is complex (it’s not - use this plan)

📚 Table of Contents

☰

• Impact on retirement goal of delaying
• Complete impact of delaying investments
• Worked out examples

Impact on retirement goal of delaying

We will use the example from this post where a SIP value of ₹ 29,777 is found for retirement 20 years away and ₹ 30 lakhs of starting lump sum amount.

We will see what happens for each year of delaying investments for the next ten years. We assume that every year the starting expense of ₹ 6 lakhs increases at the same 7% inflation as in the example.

If there is one year of delay, the SIP requirement jumps by 15% to ₹ 34,218 and then to ₹ 39,300 (32% increase) if the delay is just 2 years. If the delay is 10 years, then the SIP amount jumps more than 4 times to ₹ 1.20 lakhs. This is the cost of starting late.

Complete impact of delaying investments

This table shows the different SIP amounts for every year of delay or increase in the amount required in the first year of investment (increasing at 7% a year). For example, if the starting investment is ₹ 9 lakhs and 14 years is left to retirement then the SIP amount will be more than ₹ 68,000.

This should convince every reader that there is a lot of benefit in starting investments as early as possible. It is easy to do as shown here:

• how and why to set a goal
• how to get asset allocation for a single goal
• how to get SIP amount for a single goal
• how to get SIP amount for a goal with multiple payments
• how to get SIP amount for traditional retirement

Worked out examples

We have two worked out examples for a 39-year old and 48-year old investor targeting retirement. We see that with the same asset base of ₹40 lakhs and the same monthly expenses of ₹45-50,000 in retirement

• the 39-year old needs to invest ₹52,223/month: How much money does this 39 year old investor need to invest per month to retire at 58?
• the 48-year old needs to invest ₹111,409/month: Late to plan retirement: how much money does this 48 year old investor need to invest per month to retire at 60?