Compounding Returns, Retirement Corpus: Monthly salary of Rs 25,000, ambition of over Rs 2.60 crore retirement corpus. At first glance, the two figures may look very mismatched. A Rs 25,000 monthly salary in a Tier I or Tier 2 city may not be high.

But one should start investing at some point, irrespective of what they earn in a month or a year.

One can’t wait for their salary to reach in lakhs before they begin their investment journey.

The simple rule for investing can be 50:30:20, where 50 per cent of the monthly income signifies needs, 30 per cent wants, and 20 per cent savings.

The savings portion can be invested to create wealth in the long run.

The beauty of long-term investment is that one can create a sizeable corpus with a small beginning.

Years of compounding and the right choice of investment can make it possible.

One should work on their skills to increase their monthly income, but even if one starts their career with a monthly salary of Rs 25,000, they can envisage building a retirement corpus that can help fulfil their needs post retirement.

In this write-up, know how a person with a Rs 25,000 monthly salary can build a retirement corpus of over Rs 2.60 crore.

Mutual fund SIP calculation conditions 

We will take the 20 per cent of monthly income as an investment amount.

So, for a Rs 25,000 monthly salary, the monthly SIP investment will be Rs 5,000.

We are expecting 12 per cent annualised return on the SIP investment. 

Step up SIP

Since we are expecting the monthly income to rise every year, we will also go for a 5 per cent rise every year in the SIP amount.

So, if, for the first year, it is Rs 5,000, for the second year, it will be Rs 5,500.  

How much will be retirement corpus in 10 years?

In 10 years, the investment through the step up SIP will be Rs 7,54,674, the estimated capital gains will be Rs 6,38,798, and the estimated value will be Rs 13,93,471.

How much will be retirement corpus in 20 years?

The invested amount during this period will be Rs 19,83,957, estimated returns will be Rs 48,84,854, and the estimated value will be Rs 68,68,812.

How much will be retirement corpus in 30 years?

The magic of compounding will be more clear in 30 years as the invested amount will be Rs 39,86,331, estimated capital gains will be Rs 2,23,80,699, and the estimated returns will be Rs 2,63,67,030.

What if one goes for flat Rs 5,000 monthly SIP for 30 years?

In that case, the invested amount will be Rs 18,00,000, estimated capital gains will be Rs 1,58,49,569, and the estimated total value of SIP investment will be Rs 1,76,49,569.

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for retirement planning.)