Regular vs Step up SIP: How you can increase retirement corpus from Rs 1 cr to Rs 3 cr by 10% annual SIP increase; see calculation
Regular SIP vs Step-up SIP: With consistent SIP investments, it is possible to build a retirement corpus of Rs 1 crore. But do you know you can grow that corpus to Rs 3 crore with the same investment amount and time frame by a 10% annual increase? All you have to do is opt for step-up SIP. See Calculation-
Regular SIP vs Step-up SIP: Everyone wants a stress-free and financially stable life after retirement, but achieving that requires proper planning. One popular way to build a good retirement corpus is through a SIP (Systematic Investment Plan). SIP is a method of investing in mutual funds, allowing investors to contribute a fixed amount regularly, such as monthly or quarterly, instead of making a lump sum investment. This approach is often preferred by investors who wish to avoid direct exposure to the stock market but still want to benefit from market-linked returns.
Step-up SIP: Help to reach financial goals faster
With consistent SIP investments, it's possible to build a retirement corpus of Rs 1 crore. But what if I told you that you could grow that corpus to Rs 3 crore with the same investment amount and time frame? All you have to do is opt for a Step-up SIP. In this option, investors increase their SIP contribution each year by a percentage of their choice, such as 5%, 10%, 15%, or any other amount that suits their financial capacity. Let’s explore how a Step-up SIP can help you achieve your financial goals faster compared to a regular SIP.
Regular SIP at Age 30
Suppose you’re 25 years old and start investing Rs 5,000 every month in a regular SIP. Your goal is to build a corpus of Rs 1.5 crore by age 50.
SIP: Calculation
According to SIP calculators, if you invest Rs 5,000 monthly for the next 25 years at a 15 per cent annuity return, your investment will grow to approximately Rs 1.6 crore (Rs 1,64,20,369). Of this, Rs 15,00,000 will be your total investment, with an estimated capital gain of Rs 1,49,20,369.
Step-Up SIP at Age 30
Now, consider that at age 25, you start with the same Rs 5,000 monthly SIP but opt for a 10 per cent annual increase in your SIP contribution. With this Step-Up SIP, and assuming a 15 per cent annuity return, your corpus could grow to nearly Rs 3 crore (Rs 3,29,08,733) over 25 years.
Step-Up SIP: Calculation
In this scenario, your total investment would be Rs 28,63,626, with an estimated capital gain of Rs 1,95,66,912.
Total investment: Rs 59,00,824
Estimated Capital Gain: Rs 2,70,07,910
Total Corpus: Rs 1,64,20,369
Step-Up SIP: Create Rs 1 crore corpus in 20 years
Moreover, you could achieve a corpus of Rs 1 crore (Rs 1,16,47,576) in just 19 years, with an investment of Rs 30,69,545 and an estimated capital gain of Rs 85,78,030.
Step-Up SIP: Corpus Double
These calculations show that with a 10 per cent Step-Up SIP, your corpus can nearly triple compared to a regular SIP. In other words, while it might take 25 years to become a crorepati with a regular SIP, a Step-Up SIP could help you achieve this goal in just 19 years.