50:30:20 Investment Strategy: Can you build Rs 3.9 crore retirement corpus with salary of Rs 30,000?
50:30:20 Investment Strategy: Many people dream of retiring with a substantial amount in their bank accounts, but with a modest salary and rising inflation, they often feel this goal is out of reach. However, achieving this goal can be possible with strategic and systematic retirement planning. Among many retirement-centric investment schemes, systematic investment plan (SIP) can be one of the options. While this strategy requires discipline and regular investments, it offers the advantage of compounding and the potential for market growth over time.
If you also aiming to build a sizable retirement corpus while managing your daily expenses, then then you may consider the 50:30:20 strategy of investment.
(Disclaimer: This is not investment advice. Calculations are projections. Please do your own due diligence or consult an advisor for retirement planning.)
What is 50:30:20 Investment Strategy?
According to the 50:30:20 SIP Investment formula, you must allocate 50 per cent of your salary for basic daily needs like house rent, bills, etc. 30 per cent can be used for less important things like clothes, gadgets, jewellery, movies, etc. At the same time, the remaining 20 per cent can be invested in a monthly SIP. To clarify how this investment strategy works, let's understand it with an example.
50:30:20 SIP Investment: How does the formula work?
Suppose your monthly income is Rs 30,000 and you apply the 50:30:20 investment formula. Now let's check how this works -
- 50% for Living Expenses: Rs 15,000 should be used for covering daily essential expenses.
- 30% for Things You Want To Buy: Use or set aside Rs 9,000 each month for things you want.
- 20% for SIP Investments: The remaining Rs 6,000 should be invested in a SIP each month.
50:30:20 SIP Investment: Applying SIP
Now, let's focus on the remaining 20 per cent of your salary i.e., Rs 6,000 that should be invested in an SIP. Let's calculate how investing this amount each month you can build a Rs 3.89 crore retirement corpus in 35 years.
50:30:20 Formula: Your total investment
If you invest Rs 6,000 every month for 35 years, you will contribute a total of Rs 25,20,000.
50:30:20 Formula: Estimated capital gain at 12% annualised return
Based on an average annualised return of 12 per cent, the estimated capital gain can be around Rs 3,64,51,614 over 35 years, the calculation shows.
50:30:20 Formula: Calculating the total amount received
With a 12 per cent return, your investment could grow to approximately Rs 3,89,71,614 in 35 years, which includes both the estimated capital gain and the amount invested.
SIP Investment: Things to Remember
It’s important to know that SIP is a market-linked scheme, so returns are not guaranteed. The 12 per cent return mentioned above is an estimate, and actual returns may vary depending on market conditions.
50:30:20 Formula: Retirement Corpus at 13% annualised return
For example, if your investments yield a 13 per cent return, your total could rise to Rs 5,11,39,104 after 35 years.
50:30:20 Formula: Retirement Corpus at 14% annualised return
Similarly, if your investments yield a 14 per cent return, your total could rise to Rs 6,73,94,916 after 35 years.
50:30:20 Formula: Retirement Corpus at 15% annualised return
And, if your investments yield a 15 per cent return, then your total could rise to Rs 8,91,63,869 after 35 years.
Benefits of SIP
Despite the market risks, SIP is often considered a good option for wealth creation because it benefits from rupee cost averaging, which is most likely to mitigate losses in the long run. However, keep in mind the inherent risks of investing in SIP and plan accordingly.