In India, the concept of FIRE (Financial Independence, Retire Early) is gaining traction as more people wish to secure financial freedom at the earliest. Many young professionals are aiming to break free from the 9-to-5 grind much earlier than traditional norms and chase other dreams.
However, retiring early means lack of a steady income for a longer duration. That’s why, in order to retire earlier than the typical 60 years of age, one needs a decent corpus of at least Rs 2 crore.
While people who are just starting into the workforce have more flexibility to create this corpus, those who are in their 30s could also reach this goal with smart efforts.
For an investor aged 30, let’s see how to build a Rs 2-crore corpus to retire at the age of 45 years:
1. Maximising Government-Backed, Tax-Free Public Provident Fund (PPF) Investment:
Annual investment limit: Rs 1.5 lakh (Rs 12,500 monthly)
Returns: 7.1% (currently)
Total investment: Rs 22,50,000
Interest earned: Rs 18,18,209
Maturity corpus: Rs 40.6 lakh
2. Investing in gold:
Monthly investment needed: Rs 12,000
Expected returns: 10%
Total investment: Rs 21.6 lakh
Estimated returns: 26.59 lakh
Maturity corpus: Rs 48.19 lakh
3. Investing in equities mutual fund to build remaining Rs 1.1 crore:
Target: Rs 1.1 crore
Monthly SIP needed: Rs 23,500
Expected returns: 12%
Total investment: Rs 42.3 lakh
Estimated returns: Rs 69.54 lakh
Maturity corpus: Rs 1.12 crore
This means that with a nearly Rs 48,000 monthly investment plan, it is possible to build a Rs 2-crore corpus in 15 years. Here, the overall investment over 15 years would be around Rs 86 lakh. To be clear, only PPF interest and maturity value is exempt from taxes. Hence, investors should take into account factors like taxes and inflation while planning their investment journey.
Investors may also opt to redesign their portfolio allocation based on risk appetite. However, it could be a prudent step to diversify investments to minimise risks, as equity returns are never guaranteed.
To avoid any potential financial stress, it is also advisable to consult a financial expert before making significant investments.
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