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Both Ramesh and Vikram want to retire at the age of 60 years. To take care of his post-retirement requirements, Ramesh invests a total amount of Rs. 35 lakhs towards his retirement corpus. On the other hand, Vikram invests a total of Rs 50 lakh towards his retirement. Despite investing less, Ramesh accumulates Rs 298 lakh, compared to Vikram's accumulation of Rs 216 lakh!. Read on to find out how..
What Ramesh had in his favour was TIME. He began investing a sum of Rs 1 lakh p.a. earlier, at the age of 25 years, up to the age of 60. Ramesh, to compensate for lost time, saved twice the amount invested by Ramesh i.e. Rs. 2 lakhs every year from the age of 35, till the age of 59 years.
It is for this precise reason you should plan for your retirement now-and not later; so you get the advantage of investments that multiply quickly each year, giving you the added advantage!
The graph above shows the retirement amount both Ramesh and Vikram accumulate by the age of 60 years. Please note: The assumption is that both investments appreciate at the rate of 10% per annum.
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