Power of Compounding for Retirement Planning: Using Rs 1,550-13,500 SIP, how to aim for Rs 1 crore corpus starting at age 25, 30 or 40?
Let’s understand how SIPs of Rs 1,550 to Rs 13,500, combined with the power of compounding, can help individuals build Rs 1 crore corpus for retirement starting at different ages.
Planning for retirement is important to ensure financial security in your golden years. With the power of compounding and disciplined investments like systematic investment plans (SIPs), investors can build a large retirement corpus. Whether you start investing at 25, 30, or 40, a SIP can help you build Rs 1 crore systematically over time. In this article, we will explore how small, and consistent investments can grow with the power of compounding, and how starting early minimises the financial effort required to achieve your goal.
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(Disclaimer: Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning)
What is Power of Compounding?
Compounding allows investors investments to grow as the returns earned are reinvested to generate further returns. The longer your money stays invested, the greater the impact of compounding. Starting early is the key to build wealth with smaller contributions over time.
Role of SIPs in Retirement Planning
Systematic investment plan (SIP) requires disciplined investing that help individuals build wealth gradually without financial pressure.
Starting early reduces the burden
If one start investing early, they can achieve their corpus goal even by investing small amount monthly. The power of compounding play a key role here. But one has to be consistent with their investment.
How does SIP work?
First you need to choose a mutual fund and set the amount you want to invest each month. The amount is automatically debited from your bank account and invested in the mutual fund. You receive a number of units in the mutual fund based on the fund's Net Asset Value (NAV) on that day. The process repeats each month, and your investments grow over time.
Calculating SIP for Rs 1 crore retirement corpus starting at age 25
If you start investing Rs 1,550 every month in SIP at the age of 25. It will approximately take 35 years to reach Rs 1 crore corpus goal with 12 per cent annualised return.
From Rs 1,550 monthly SIP to Rs 1 crore corpus at 12 per cent annualised return; see calculation
It will take approximately 35 years to achieve the target of Rs 1 crore retirement corpus. During that time, the investment will be Rs 6,51,000, the estimated capital gains will be Rs 94,16,667 and the estimated retirement corpus will be Rs 1,00,67,667.
Calculating SIP for Rs 1 crore retirement corpus starting at age 30
If you invest Rs 3,000 every month in SIP at the age of 30. It will approximately take 30 years to reach Rs 1 crore corpus goal with 12 per cent annualised return.
From Rs 3,000 monthly SIP to Rs 1 crore corpus at 12 per cent annualised return; see calculation
It will take approximately 30 years to achieve the target of Rs 1 crore retirement corpus. During that time, the investment will be Rs 10,80,000, the estimated capital gains will be Rs 95,09,741 and the estimated retirement corpus will be Rs 1,05,89,741.
Calculating SIP for Rs 1 crore retirement corpus starting at age 40
If you invest Rs 13,500 every month in SIP at the age of 40. It will approximately take 18 years to reach Rs 1 crore corpus goal with 12 per cent annualised return.
From Rs 13,550 monthly SIP to Rs 1 crore corpus at 12 per cent annualised return; see calculation
It will take approximately 18 years to achieve the target of Rs 1 crore retirement corpus. During that time, the investment will be Rs 29,16,000, the estimated capital gains will be Rs 74,17,430 and the estimated retirement corpus will be Rs 1,03,33,430.
How soon will you achieve the target of Rs 1 crore if you start investing at 25?
If you invest Rs 1,550 in monthly SIP, starting at the age of 25. You can reach Rs 1 crore corpus goal at the age of 50.
How soon will you achieve the target of Rs 1 crore if you start investing at 30?
If you invest Rs 3,000 in monthly SIP, starting at the age of 30. You can reach Rs 1 crore corpus goal at the age of 60.
How soon will you achieve the target of Rs 1 crore if you start investing at 40?
If you invest Rs 13,500 in monthly SIP, starting at the age of 40. You can reach Rs 1 crore corpus goal at the age of 58.