Can Rs 12,000 monthly SIP investment create Rs 8.93 crore retirement corpus? See calculations to know
Retirement Planning: Beginning with a small monthly amount and taking it to build a sizeable corpus can be the retirement goal of any investor. The important factor in this journey is to start investing early.
Power of compounding, retirement calculator, retirement corpus calculator: Everyone envisages having a comfortable retirement. But one needs to have a sufficient retirement corpus to enjoy that stage of life. But how much? A fund large enough to help you fulfil liabilities, repay loans, and live retirement life. One should calculate post-tax return on their investment and also consider 6 per cent annual inflation. The amount can be quite large compared to your monthly income. The other important thing is that one can retire as soon as they achieve financial freedom. They can retire at 40, 50, or 60. But what if one wants to retire early or is aiming to achieve financial freedom at a fixed age they have set a target for? The solution is they need to plan their retirement early in their professional career and start investing according to that.
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(This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
Why early retirement is possible
Early retirement is possible if one begins their investment journey early. It will give them time for the compounding of their investment.
How compounding can increase corpus faster
Here are a couple of examples. One starts a Rs 12,000 monthly SIP investment and gets 12 per cent annualised return on it.
If they make this investment for 20 years, their estimated corpus will be Rs 1,19,89,775 on the investment of Rs 28,80,000.
How compounding can increase corpus faster
However, if they continue this investment for another 5 years, their total investment will be Rs 36,00,000, but their estimated corpus will increase to Rs 2,27,71,621.
It happens because compounding shows its impact with time. The early starter can get an edge over a late beginner because of the same phenomenon.
Another example of compounding in retirement corpus
A and B are eyeing a Rs 6.5 crore retirement corpus each. A is 25 years old and B is 30 years old. Both want to achieve the target by 60. Both are expecting 12 per cent annualised return from their respective SIP investments. A's investment period is 35 years and B's 30.
A needs to invest Rs 10,000 a month to achieve the target, where their total investment will be Rs 42,00,000.
Another example of compounding in retirement corpus
B needs to invest Rs 18,400 a month to achieve the milestone, where their total investment will be Rs 66,24,000.
A builds the same estimated corpus with estimated Rs 24,24,000 less investment amount.
From Rs 12,000 monthly SIP to Rs 7.80 crore corpus
Calculation terms
We will calculate a Rs 12,000 monthly SIP investment at annualised return rate of 12.50 per cent. This kind of return can be possible in an equity mutual fund. We will calculate corpus at different stages of investment.
Retirement Corpus from Rs 12,000 monthly SIP investment in 10 years
The invested amount in 10 years will be Rs 14,40,000, estimated capital gains will be Rs 14,32,576, and the estimated corpus will be Rs 28,72,576.
Retirement Corpus from Rs 12,000 monthly SIP investment in 20 years
The investment in 20 years will be Rs 28,80,000, estimated capital gains will be Rs 99,54,235, and the estimated corpus will be Rs 1,28,34,235.
Retirement Corpus from Rs 12,000 monthly SIP investment in 30 years
The invested amount in 30 years will be Rs 43,20,000, estimated capital gains will be Rs 4,30,59,761, and the estimated corpus will be Rs 4,73,79,761.
Retirement Corpus from Rs 12,000 monthly SIP investment in 35 years
The total investment in 35 years will be Rs 50,40,000, estimated capital gains will be Rs 8,41,94,973, and the estimated corpus will be Rs 8,92,34,973.
What calculations show
If a 25-year-old person starts investing Rs 12,000 a month in a mutual fund SIP, they can get estimated Rs 8,92,34,973 crore corpus by 60.