We will show how compounding is expected to create phenomenal wealth over the lifetime of your portfolio. In many articles and online calculators, you can see the corpus you need to accumulate by retirement.
For example, an investor expecting to retire in 20 years for a lifestyle that costs ₹50,000/month in today’s money needs to reach a retirement corpus of ₹8 crores in 20 years to retire.
However, you will be surprised to know that this corpus is expected to grow to ₹22 crores over the next few decades. These numbers are expected to be a fun thought experiment based on certain assumptions, so do not expect to get these exact numbers if the markets do not perform as expected.
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We will use the Arthgyaan goal-based investing tool to calculate the target retirement corpus and the portfolio value from today until the end of retirement.
Model output
(click to open in a new tab)
The outputs are:
retirement corpus is ₹8 crores
peak corpus reached after 46 years from today, i.e. at the age of 66
the portfolio value and the equity and debt allocations increase with time
the equity allocation falls as retirement comes closer
Once retirement starts
the overall portfolio rises first and then starts falling after a peak
peaks of equity and debt components are reached at different times
the equity allocation first rises in retirement and then falls to zero
Generalising the result
(click to open in a new tab)
This chart shows how the portfolio reaches its peak at different times, using the same assumptions but varying the time left until retirement. Many investors will be shocked at how, due to the power of compounding, the portfolio value reaches enormous values. For example, a 30-year-old targeting retirement after 30 years may expect to see a portfolio of ₹16 crores (at the start of retirement) grow to ₹70 crores near the end of retirement.
How to create a retirement portfolio that helps you reach such corpus figures?
This article shows a simple retirement and review plan that anyone can follow in a step-by-step manner: Low-stress retirement planning calculations: worked out example. Once you follow these steps, creating and maintaining a retirement portfolio and reaching such significant corpus figures becomes very doable.
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This article shows how a very typical salaried couple with one child can invest for future goals using the Arthgyaan goal-based investing tool.
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RetirementReader Questions
How much money does this 39 year old investor need to invest per month to retire at 58?
A quick retirement calculation for a reader query who has a good amount of corpus already saved for retirement.
2. Use our goal-based investing template to prepare a financial plan for yourself OR use this quick and fastonline calculator to find out the SIP amount and asset allocation for your goals.
Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.
This post titled How big will your portfolio grow in retirement? first appeared on 28 May 2023 at https://arthgyaan.com
Retirement
