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Financial Planning
45 and haven’t started saving for retirement? Here’s the fix
Key Takeaways:
- At 45, you're in your highest earning years with fewer financial obligations, making it an ideal time to focus on retirement planning.
- Starting at 45 requires saving at least 25-30% of your income specifically for retirement, compared to the standard 10-15%.
- A balanced investment strategy for a 45-year-old should include 50-60% in equity investments, 30-40% in debt instruments, and 5-10% in alternatives.
Are you 45 and thinking about what your retirement planning is looking like? Well, no worries; you're just in your prime to make the most of your earnings anyway. Plus, several people in their mid-40s begin to turn their attention towards retirement, and rightly so.
This is because, at this age, you probably have more financial security than ever before. You probably have already taken care of major expenses such as mortgages, children's education, or family obligations. Now, you can direct your finances toward developing your future security. So, let us see how to get the most out of these best saving years.
45 and just getting started: Your retirement playbook
At 45, you have some great commanding benefits for retirement planning:
- Highest earning years: Most people in their 45s are at the peak of their earnings, providing you with additional money to invest.
- Career stability established: Your professional standing is usually more established now than in your earlier life.
- Better financial understanding: You are clearer about what really matters to you for your future.
- Financial discipline: With age comes an improved ability to manage money and spend wisely.
- More investment experience: You probably know more about money now than when you were in your 20s.
Your 15-20 years until retirement is still a significant amount of time. Lots of successful retirement portfolios have been established in that time. Plus, with concentrated effort now, you can easily establish the retirement life you envision.
How much do you need?
Many retirement experts suggest targeting at least 25–30 times your annual expenses saved up by the time you retire to ensure financial comfort.
If your current annual expense is ₹6 lakh (₹50,000 per month), by the time you turn 60, your expenses could rise to approximately ₹14.4 lakh annually (assuming 6% annual inflation).
Using the 25X rule, you would need a retirement corpus of around ₹3.6 crores to maintain your current lifestyle post-retirement.
| Current age | Retirement age | Estimated corpus (considering 25 times annual expenses) | Estimated corpus (considering 30 times annual expenses) |
|---|---|---|---|
| 45 | 60 | ₹3.6 crores | ₹4.3 crores |
Building your catch-up plan
To reach your retirement goal of ₹3.6 crore, it’s important to be disciplined and aggressive with your savings, especially if you're starting in your 40s.
One of the most effective ways to build the retirement corpus is through Systematic Investment Plans (SIPs) in equity mutual funds, which have the potential to deliver higher returns over the long term.
Let’s say you have about 15 years until retirement. Assuming an average return of 12% per annum, you will need to invest ₹72,000 per month to hit your ₹3.6 crore target.
Equity mutual funds are ideal for long-term goals like retirement because they tend to outperform traditional savings options over extended periods.
What's more? SIPs make it easier to stay consistent, even during market ups and downs. So don’t wait and start now. Invest regularly, and let your money work harder for your future.
Conclusion
You begin retirement planning at 45 so that you stand in a comfortable position with your highest earning capability and financial awareness. The upcoming 15-20 years give you a favourable time to save for a stable and comfortable post-retirement life.
And, of course, most successful retirees started their earnest savings in their mid-40s and succeeded. So, take the first step today to tap your current earning capacity – the optimum time was 20 years ago, but the second-best time is today.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked to availment of any other facility from the Bank. This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future returns. Readers are advised to consult a qualified financial advisor before making any investment decisions. Terms and Conditions apply.
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