555 SIP Strategy: How to get Rs 5 crore retirement corpus with Rs 9,555 monthly investment?
555 SIP Strategy: Planning for retirement during the salary phase of your life is essential for ensuring a stress-free post-retirement life. It helps reduce the burden of relying on others for daily expenses, such as food and medicine. However, many people begin thinking about retirement planning too late. To build a substantial retirement corpus with minimal investment, it's important to start early in your career, as the power of compounding significantly boosts savings when investments are made over a long period. In this article, we will show you, through calculations, how anyone can achieve a robust retirement fund by applying the 555 SIP strategy.
What is SIP?
SIP (Systematic Investment Plan) is a method of investing a fixed amount regularly in mutual funds to build wealth over time through compounding.
What is Compounding?
Compounding is the process where the value of an investment grows by earning returns on both the initial principal and the accumulated interest or profits over time.
Investment Frequency Options
SIP investments can be made daily, weekly, monthly, quarterly, or annually, based on your goals and preferences.
Power of Time in SIP
Starting early in SIP allows your investments to grow through compounding, maximising wealth creation over time.
555 SIP Strategy
Suppose you are 25 years old and start depositing Rs 9,555 every month into an SIP. Now, let's find out how the '555' SIP strategy works.
Assuming an Annualised Return of 12%
Here, we are assuming an average return of 12 per cent on the investments until retirement.
What is the '555' SIP Strategy?
First 5 - Retiring five years earlier
Second 5 - Increase your SIP by 5 per cent every year
Third 5 - Keep investing till the age of 55
Retire Early With 555 SIP Strategy
If you keep investing like this continuously, then by the age of 55 you will have a fund of Rs 5.03 crore. That means, a small change in SIP and you can retire before time.
Example to illustrate the '555' SIP Strategy
Let's assume you start investing Rs 9,555 every month in a SIP and increase it by 5 per cent each year, with an average return of 12 per cent.
555 SIP Strategy: Total Investment
Over 30 years, by the age of 55, your total investment will be approximately Rs 76,17,878.
555 SIP Strategy: Estimated Capital Gain
Due to the power of compounding, you will earn around Rs 4,27,69,516 as capital gain.
555 SIP Strategy: Total Amount Received
Adding the total investment and capital gain, the total amount received after 30 years will be Rs 5,03,87,394.