SIP Returns: How soon one may achieve Rs 2 crore retirement corpus with salary of Rs 20K, Rs 50K, Rs 75K, or Rs 100K

SIP Return: When one earns less, their excuse for not saving money is that how can we save while we get such a small amount every month? When one has a high salary, their excuse for not saving money is that they spend on their hobbies and are left with no money to save at month-end. The jist of saying this is that however you earn, you may have your excuses to not save money.

Now, think just the opposite: you don't earn much in a month, but you invest a small amount in an investment scheme.

To make sure that you invest a predecided amount every month, you have opted for the auto-debit facility.

On your salary day, your investment is automatically debited from your account.

Your money grows even though you don't earn much.

What we are trying to portray here is that saving is a habit. It doesn't depend on your monthly earnings, but on your attitude to save, invest, and see your money grow.

If your salary is Rs 20,000, Rs 50,000, or Rs 100,00, you can save money, invest, and build a large corpus.

But, can you build a Rs 2 crore retirement corpus if your monthly salary is Rs 20,000?

This can be done by investing in schemes where you get compound returns.

If you stay in such investments for a long duration, your small deposit per month can help you build a large corpus.

Systematic Investment Plan (SIP) method is a popular investment method in mutual funds, and it also gives compound returns.

Just a Rs 2,000 monthly SIP made for 30 years can help you generate a corpus of Rs 70,59828, and that too when your investment amount will be just Rs 7,20,000. 

How to build Rs 2 crore retirement corpus with Rs 2,000 starting salary?

Before we move on to the calculation part, let's lay down some rules first.

A prevalent financial formula says that you should save 20 per cent of your salary every month.

If you earn Rs 20,000 a month, you can save Rs 4,000 and invest it in some investment providing compound growth, such as an SIP.

We are assuming a 12 per cent return on your investments. 

If you start making Rs 4,000 SIP every month in a mutual fund, your investment in 20 years will be Rs 9,60,000, long-term capital gains will be Rs 30,36,592, and the total amount will be Rs 39,96,592.

Now continue this investment for another 10 years, and after 30 years, your investment will be Rs 14,40,000, long-term capital gains will be Rs 1,26,79655, and the expected amount will be Rs 14119655.

As you see here, compounding works faster after 20 years. But after 30 years, you are still nearly Rs 59 lakh short of your target of Rs 2 crore.

At this stage, you need to continue your investment for just another three years.

After 33 years, your invested amount will be Rs 15,84,000, long-term capital gains will be Rs 1,87,91,992, and the expected amount will be Rs 2,03,75,992.

With a Rs 4,000 SIP that provides you annual compound returns of 12 per cent, you can achieve a Rs 2 crore corpus in 33 years.

It sounds like quite a long period. But if you are joining a job at 25 years old, you can build such a large corpus at 58 years of age.

And that too when your monthly salary is most likely to be many folds higher than your initial salary of Rs 20,000.

How soon can you achieve a Rs 2 crore corpus with Rs 50,000, Rs 75,000, and Rs 100,000 salaries?

If you earn Rs 50,000 a month

You can save Rs 10,000 a month, or 20 per cent of Rs 50,000, and invest it in a SIP that gives you a 12 per cent return, after 26 years, your invested amount will be Rs 31,20,000, long-term capital gains will be Rs 1,83,91,120, and the expected amount will be Rs 2,15,11,120. 

If you earn Rs 75,000 a month

You can save Rs 15,000 a month, 20 per cent of Rs 75,000, and invest it in a SIP that gives you a 12 per cent return. After 23 years, your invested amount will be Rs 41,40,000, long-term capital gains will be Rs 1,79,55,859, and the expected amount will be Rs 2,20,95,859. 

If you earn Rs 100,000 a month

You can save Rs 20,000 a month, or 20 per cent of Rs 100,000, and invest it in a SIP that gives you 12 per cent return, after 20 years, your invested amount will be Rs 48,00,000, long-term capital gains will be Rs 1,51,82,958 and the expected amount will be Rs 1,99,82,958. 

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert before making an investment.)