Can I Catch Up if I Started Investing Late?

Published: August 26, 2018 at 12:25 pm

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“I started investing Late, Can I Catch Up?” I am often asked this question. The catching up here refers to being able to create an adequate retirement corpus. The answer depends on the age of the person. For someone in the 30s (even late 30s), I think it is quite possible if they put their head down and invest enough for the next 15 years.

Before we begin: Don’t forget to read yesterday post: Free Direct Mutual Fund Portals: Is this a healthy development? which has divided opinions. Also, if you are Tamil speaker, this is part 3 of the Re-assemble in Tamil: buying term life insurance  ஆயுள் காப்பீடு (Term life insurance) வாங்குவது எப்படி: பணமயமான எதிர்காலம் – மூன்றாம் படி.

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Fifteen years is a lifetime when it comes to investing and with some luck and discipline, even a 40-year-old can make enough corpus to retire by 55 or so. Even by age 40, an exposure to 60% equity need not be risky. So it is not late at all. Only above age 45, the risk becomes too high even if the person has the appetite for it.

Let me punch in some rosy numbers for this post.

Age: 35

Current approximate monthly expenses (annual by 12) : 40,000

No of years you expect to work: 20 (retirement by age 55)

Inflation expectation: 7%

Life expectancy: age 85 (30 years in retirement)

Return expected before retirement from entire portfolio: 10% (after tax)

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Return expected after retirement from entire portfolio: 9% (after tax: a tough ask, but please play along)

The rate at which monthly investment will increase each year from now until age 55: 10% (this is a big ask, may seem rosy now, but will get tough in a few years, but again please play along).

The amount at hand for retirement so far: 5 Lakh (this is not unreasonable for someone in 20-30% tax slab who has been work for at least 7-8 years now. The EPF corpus should be close to this.)

The rate of return on the above amount in future: 8%

The monthly investment required is 68% of monthly expenses (40,000) or about 27,000 a month. This includes the mandatory EPF contribution. You can consider a portfolio of 60% in equity and 40% in EPF. Possible or not?

Now, for the same set of assumptions,

  • expenses increasing each year by 7%
  • retirement at 55
  • death by 85
  • post-tax portfolio return pre-retirement: 10%
  • post-tax portfolio return post-retirement: 9%
  • The annual increase in monthly investment: 10%
  • 5L growing at 8% each year

If the 35-year-old delays investing by,

  • 1Y, the monthly investment required = 73% of the monthly expenses by age 36
  • 2Y, the monthly investment required = 80% of the monthly expenses by age 37
  • 3Y, the monthly investment required = 87% of the monthly expenses by age 38
  • 4Y, the monthly investment required = 95% of the monthly expenses by age 39
  • ….

You can use this “Can I catch up?” calculator to punch in your own numbers.

Bottom line: Do not think about the past and regret. Invest as much as you can and invest right with hope, discipline and patience. If you want some motivation, here is a list of all stupid mistakes that I made until I started earning at age 32 (common for academics): The Financial Arrow of Time.

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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  1. Sir,
    Thanks for the post. Most of the PF planning based on the current job ( salary level) till 55. But most of the IT population above age 35 don’t have the visibility of the job prospect above 1-2 yrs. Need some planner for the above category, if your time permits.
    Currently I am saving more than 100% of my monthly expense. But I Don’t have the confidence I can make it 🙁

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