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.

ZeeBiz WebTeam | Nov 14, 2024, 02:18 PM IST

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)

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Understanding the Power of Compounding

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.
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How it Works?

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.

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Role of Pension Plans in Building a Retirement Corpus

Role of Pension Plans in Building a Retirement Corpus

What is a Pension Plan: A financial product that allows you to save for retirement through one-time or periodic contributions.

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Purpose and Benefit

Purpose and Benefit

  • Purpose: Provides a steady income post-retirement, offering financial security.
  • Benefit: Helps individuals ensure a comfortable and secure retirement lifestyle.

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SIP and Step-Up Mutual Fund Calculators

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.

  • Step-Up Calculator: Tool to estimate SIP growth, accommodating annual increases to boost future returns.

  • Advantage: Enables structured, scalable investment growth in line with salary increases or inflation adjustments.

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Monthly Salary of Rs 25,000

Monthly Salary of Rs 25,000

  • Investment Amount: 10% of salary, starting with Rs 5,000 per month in a SIP.

  • Total Investment: Rs 28,63,626
  • Estimated Gains: Rs 1,08,10,305
  • Total Corpus by 50: Rs 1,36,73,931

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Monthly Salary of Rs 40,000

Monthly Salary of Rs 40,000

  • Investment Amount: 10% of salary, starting with Rs 8,000 per month in a SIP.

  • Total Investment: Rs 45,81,801
  • Estimated Gains: Rs 1,72,96,487
  • Total Corpus by 50: Rs 2,18,78,289

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Monthly Salary of Rs 50,000

Monthly Salary of Rs 50,000

  • Investment Amount: 10% of salary, starting with Rs 10,000 per month in a SIP.
  • Total Investment: Rs 57,27,252
  • Estimated Gains: Rs 2,16,20,609
  • Total Corpus by 50: Rs 2,73,47,861

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