Importance of Investments to Achieve Retirement Goal

The retirement goal is unique in the sense that it requires a large corpus to be built out of owned funds since it cannot be funded through loans or borrowings. The other feature of the goal is that it is long-term in nature. It has to be met at a time in future. If the money saved for the goal was kept unused till it is required to meet the expenses in retirement, the money will lose value given the long period to retirement. Again, keeping the money idle would mean that the ability of money to be invested and earning returns is not being used.

Consider the case of ‘X’ who requires to accumulate a corpus of Rs.1 crore over 35 years. If X intended to keep the savings idle i.e. no investment in any instrument or asset , then he would require a monthly contribution of Rs.23,810/- each month for 35 years. If X invested the savings in an investment that earned 8 percent then he would require to invest only Rs.4,331/- each month for 35 years.

Investing the money instead of keeping the savings unutilized frees up a large chunk of X’s savings for other goals and needs. Large goals like retirement can only realistically be met if the money saved is invested.