Power of Compounding: Monthly salary Rs 25K, Rs 40K or Rs 50K? Here's how one can create a retirement corpus of Rs 1.36 cr, Rs 2.18 cr or Rs 2.73 cr by 50 years of age
Learn how compounding and systematic investments can turn a portion of monthly salary into a substantial retirement corpus. With a 5% annual step-up, build financial security across income levels.
Compounding is a powerful tool for growing wealth, especially when combined with regular, systematic investments. By investing just 10% of a monthly salary with an annual 5% increase, individuals can create a significant retirement corpus by age 50. Whether your monthly income is Rs 25,000, Rs 40,000, or Rs 50,000, this strategy can help build financial security for a comfortable post-retirement life. Discover how different salary levels can yield substantial returns through the power of compounding and SIP.
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning)
Understanding the Power of Compounding
Definition: Compounding is when interest earned on an investment is reinvested, creating a cycle of exponential growth over time.
- How it Works: Interest earned not only grows the initial investment but also generates its own interest, amplifying the total amount.
- Impact: Over long periods, even small, consistent investments can accumulate significantly through compounding.
- Analogy: Think of compounding as a snowball rolling downhill, growing bigger and picking up speed as it rolls.
How it Works?
- How it Works: Interest earned not only grows the initial investment but also generates its own interest, amplifying the total amount.
- Impact: Over long periods, even small, consistent investments can accumulate significantly through compounding.
- Analogy: Think of compounding as a snowball rolling downhill, growing bigger and picking up speed as it rolls.
Role of Pension Plans in Building a Retirement Corpus
Purpose and Benefit
SIP and Step-Up Mutual Fund Calculators
Systematic Investment Plan (SIP): Allows regular investments into mutual funds, automatically debited from a bank account at chosen intervals.
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Step-Up Calculator: Tool to estimate SIP growth, accommodating annual increases to boost future returns.
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Advantage: Enables structured, scalable investment growth in line with salary increases or inflation adjustments.