25-year vs 30-year SIP Return: How 5-year delay in Rs 12,000 monthly investment can cost Rs 2 crore; see calculation charts
30-year SIP return vs 25-year SIP return: Retirement is long-term planning, where a delay in starting by a couple of years can cut one's corpus by many crores. The early starter gets the benefit of compounding more than what a late starter gets.
30-year SIP Return vs 25-year SIP Return: One should start retirement planning early. But how soon should they start in their life, and what difference can it make to their retirement corpus? The answer is that if their investment horizon is long, the delay of a couple of years can cost one dearly. Their retirement corpus can be much less than the corpus generated with a few more years of investment. The gap can be significant even if one invests as small an amount as Rs 3,000 a month. The stark difference is mainly because of the extra years of compounding an early starter gets. Let's see different scenarios how compounding works, its effect on the retirement corpus in the long run, and how a 5-year delay in monthly SIP investment of Rs 12,000 can cost an investor around Rs 2 crore.
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Corpus generated from Rs 4,000 monthly SIP investment in 25 years
To see the power of compounding, let's begin with a Rs 4,000 monthly SIP investment. The expected annualised return from the investment will be 12 per cent.
In 25 years, the investment will be Rs 12,00,000, and the expected corpus will be Rs 75,90,540. Fast-forward this investment to 5 years and see what happens.
Corpus generated from Rs 4,000 monthly SIP investment in 30 years
In the next 5 years, the investor will invest Rs 2,40,000 more, but the expected corpus will be swelled to Rs 1,41,19,655. The corpus has nearly doubled. Let's continue it for 5 years and see how fast the corpus grows.
Corpus generated from Rs 4,000 monthly SIP investment in 35 years
In 35 years, the SIP investment will be Rs 16,80,000, and the expected corpus will be Rs 2,59,81,076. Now compare this corpus with the corpus generated in 25 years. It's 4 times with Rs 4,80,000 more investment. Let's play this number game with another scenario.
Rs 5 cr corpus with Rs 5,000, Rs 25,000, and Rs 50,000 monthly SIP investment
We will see how a Rs 5 crore corpus can be created with Rs 5,000, Rs 25,000, and Rs 50,000 monthly SIP investments, and which of the 3 can generate with the least investment. The annualised return in each case will be 12 per cent.
Rs 5 cr corpus from Rs 5,000 monthly SIP investment
It will take approximately 38 years to reach from Rs 5,000 monthly SIP investment to Rs 5 crore corpus.
In 38 years, the total investment will be Rs 22,80,000, and the expected corpus will be Rs 4,66,83,679.
Rs 5 cr corpus from Rs 25,000 monthly SIP investment
One can reach the goal in approximately 26 years.
In 26 years, the total investment will be Rs 78,00,000, and the expected corpus will be Rs 5,37,77,801.
Rs 5 cr corpus from Rs 50,000 monthly SIP investment
In approximately 20 years, one can reach from Rs 50,000 monthly investment to a Rs 5 crore corpus.
In those years, the investment will be Rs 1,20,00,000, and the expected corpus will be Rs 4,99,57,396.
Conclusion
In all 3 examples, you can see that the end target reached is Rs 5 crore, but the investment amount is increasing considerably. In the 3rd case, it is nearly 6 times the investment in the 1st case. It's because of extra years of compounding in the 1st scenario.
Calculations
For our story, we will take a Rs 12,000 monthly SIP investment and show how much fund can be generated in 20, 25, and 30 years.
Corpus from Rs 12,000 monthly SIP investment in 20 years
In 20 years, the investment will be Rs 28,80,000, and the expected corpus will be Rs 1,19,89,775.
Corpus from Rs 12,000 monthly SIP investment in 25 years
In 25 years, the total investment will be Rs 36,00,000, and the expected corpus will be Rs 2,27,71,621.
Corpus from Rs 12,000 monthly SIP investment in 30 years
In 30 years, the investment will be Rs 43,20,000, and the expected corpus will be Rs 4,23,58,965.
Impact of compounding
If we compare the 30-year corpus with the 20-year corpus, the cost of delay is Rs 3,03,69,190 with an extra investment of Rs 14,40,000 in 10 years.
| SIP starting age | 30 Years | 40 Years |
| SIP ending age | 60 Years | 60 Years |
| Total Years Invested | 30 Years | 20 Years |
| Total Amount Invested | ₹43.20 Lacs | ₹28.80 Lacs |
| Final Value of Your Investment | ₹4.19 Cr | ₹1.19 Cr |
| Wealth creation | ₹3.76 Cr | ₹89.91 Lacs |
| Cost of Delay |
₹3.01 Cr
|
Impact of compounding
If we compare the 30-year corpus with the corpus generated in 25 years, the cost of delay is Rs 1,95,87,344, with an extra investment of Rs 7,20,000.
| SIP starting age | 30 Years | 35 Years |
| SIP ending age | 60 Years | 60 Years |
| Total Years Invested | 30 Years | 25 Years |
| Total Amount Invested | ₹43.20 Lacs | ₹36.00 Lacs |
| Final Value of Your Investment | ₹4.19 Cr | ₹2.25 Cr |
| Wealth creation | ₹3.76 Cr | ₹1.89 Cr |
| Cost of Delay |
₹1.94 Cr
|