Power of Compounding: Monthly savings Rs 9,000; here's how you can generate Rs 8 crore corpus through step-up SIP
Starting to invest early can help one build a large retirement fund. The earlier you begin, the better your chances of growing your savings compared to someone who starts later. In this article, we’ll see how saving Rs 9,000 every month and investing it in a step-up Systematic Investment Plan (SIP) can help you build a retirement corpus of Rs 8 crore.
Whether you start investing early or late is a personal choice, but building a retirement fund before you retire can bring peace of mind and financial freedom. If you save Rs 9,000 every month and invest it in a mutual fund through step-up SIP, you may grow your corpus to Rs 8 crore over time. Let’s see how this works.
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(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
What is Step-up SIP?
In step-up SIP, investors can increase their investment amount at regular intervals, either periodically or annually (6 months or 12 months) by a fixed amount or percentage.
What is SIP?
Mutual fund SIP has a fixed investment amount that remains the same throughout the period. Investors can invest daily, weekly, monthly, half-yearly, or yearly in it, with a minimum amount of Rs 100.
Step-up vs SIP
SIP and step-up SIP are closely related but they have distinct features. A systematic investment plan (SIP) has a fixed amount, whereas a step-up SIP allows for periodic increases.
Advantage of Step-up SIP
Investors can start with a fixed monthly investment and gradually raise their contribution as their income rises.
Step-up SIP: Calculation conditions
In Step-up SIP, we will do the calculation on a 12 per cent annualised return and a 5 per cent annual step-up each year. Here, the time period we are considering to reach the target corpus is 35 years. Thus, for better understanding, we will break down the calculation.
What will be your corpus in 10 years with Rs 9,000 monthly investment in Step-up SIP?
The estimated corpus will be Rs 25,08,248. During that time, the invested amount will be approximately Rs 13,58,412, and the estimated capital gains will be Rs 11,49,836.
(Note: The calculations are done on 12 per cent annualised return and a 5 per cent annual step-up each year)
What will be your corpus in 20 years with Rs 9,000 monthly investment in Step-up SIP?
The estimated corpus will be Rs 1,23,63,861. During that time, the invested amount will be approximately Rs 35,71,123, and the estimated capital gains will be Rs 87,92,738.
What will be your corpus in 30 years with Rs 9,000 monthly investment in Step-up SIP?
The estimated corpus will be Rs 4,74,60,654. During that time, the invested amount will be approximately Rs 71,75,396, and the estimated capital gains will be Rs 4,02,85,258.
What will be your corpus in 35 years with Rs 9,000 monthly investment in Step-up SIP?
The estimated corpus will be Rs 8,97,26,488. During that time, the invested amount will be approximately Rs 97,54,593, and the estimated capital gains will be Rs 7,99,71,895.
Close to target in 34 years
Well, one will almost achieve their target corpus of Rs 8 crore in 34 years with 12 per cent annualised return and 5 per cent annual step-up each year. Your estimated retirement corpus in 34 years will be Rs 7,90,90,239. During that time, the invested amount will be around Rs 91,87,232, and the estimated capital gains will be Rs 6,99,03,008.
What if one opts for a simple SIP of Rs 9,000 monthly for 35 years
A monthly SIP of Rs 9,000 can generate an estimated corpus of Rs 5,84,57,422 in 35 years with an annualised return of 12 per cent. The invested amount during the time will be around Rs 37,80,000, and the estimated capital gains will be Rs 5,46,77,422.