Crorepati Plan For Retirement: How Much SIP You Need To Hit Rs 5 Cr Wealth Without Touching Your Salary?

Retirement planning has become one of the most important yet often neglected goals for young Indians. In a country where over 62% of the population is within working age and the average age is below 28, it's crucial to understand that the responsibility of building a retirement corpus lies squarely with the individual, especially for private sector employees with no guaranteed pension or social security.

With higher costs of living and a longer life expectancy, retirement planning has now become primary for many Indians. Thus, the question: can one retiree-for example-with an investment corpus of Rs 5 crore, without dipping into his regular salary? The answer lies in careful investments, specifically, SIPs.

Considered as one of the best options to create wealth for long-term goals, SIPs allow investors to deposit mutual funds at regular intervals, averaging the prices and reducing the effects of volatility in the market. Being a practical compounding method, SIPs can build your wealth over the passing years.

The Rs 5 Crore Question

Let's put it in perspective. The Sensex has delivered a historical return of about 15.5% per annum over the past 45 years. Even with a conservative estimate of 12% annual returns, an SIP of Rs 50,000 per month can grow to nearly Rs 5 crore in 20 years. That's the magic of compounding in action, as per Gaurav Goel, (Entrepreneur and SEBI Registered Investment Advisor).

If your goal is to build a retirement corpus of Rs 5 crore without dipping into your salary or making erratic one-time investments, the answer lies in a disciplined and consistent SIP (Systematic Investment Plan) approach-preferably in mutual funds, as per Sachin Jain, Managing Partner, Scripbox.

Let's look at three scenarios based on different starting ages, assuming a 15% CAGR (Compounded Annual Growth Rate), which Indian equity markets, particularly index funds, have historically delivered over the long term, as recommended by Sachin Jain.

Start Early (Age 25):

• Monthly SIP required: Rs 7,300
• Time horizon: 30 years (till age 55)
• Total investment: Rs 26.3 lakhs
• Outcome: Rs 5 crore corpus
• Starting at 25 gives time the power to work for you. Just Rs 7,300 a month can comfortably lead you to a Rs 5 crore nest egg.

Delay by 10 years (Start at Age 35):

• Monthly SIP required: Rs 33,000
• Time horizon: 20 years
• Total investment: Rs 79.2 lakhs
• A decade's delay multiplies your monthly SIP almost 5x. The cost of waiting is massive.

Start at Age 40:

• Monthly SIP required: Rs 74,000
• Time horizon: 15 years
• Total investment: Rs 1.33 crore
• Delaying savings to age 40 means you invest more than what you aim to accumulate. That's the price of lost time.

While everyone chases high returns (R) in the compounding formula, it's actually T-time that has the most dramatic impact. The earlier you begin, the less pressure you feel, and the more your investments work on your behalf.

How Much Should You Invest?

Consistent SIPs are the best approach to acquire Rs 5 crore, assuming you have 25-30 years before retirement. As per CA Manish Mishra, Founder, GenZCFO, here is an approximate estimate of the amount you must invest if we assume a conservative 12% annual return rate from mutual funds:

• Investment Period: 30 years; a monthly SIP of about Rs 15,000 will be required to reach Rs 5 crore.
• 25-year investment period; a monthly SIP of about Rs 25,000 would be needed.
• Investment Period: 20 years; monthly investment would be approximately Rs 45,000.
• Investment Period: 15 years; a sizeable monthly SIP of about Rs 90,000 will be necessary.

Power of SIPs In Retirement Planning

If you start investing at age 30 and aim to retire by 50, a monthly SIP of around Rs 75,000 in equity mutual funds (assuming 14% annualized returns) can help you comfortably reach your Rs 5 crore target. But if you delay this by a decade and begin at age 40, you'll need to invest nearly Rs 1.9 lakhs per month to reach the same goal by age 50-more than double the monthly commitment as per Harsh Gahlaut, Co-founder, and CEO of FinEdge. This shows how time, not just money, is your biggest ally when it comes to retirement planning.

SIP Calculator

To accumulate Rs 5 crore in 20 years, you don't need a lottery ticket; you need a systematic investment plan (SIP) and patience. Assuming a moderate 12% annual return (compounded), your monthly SIP needs to be approximately Rs 43,000. Yes, Rs 43,000 a month may seem steep, but remember - you're not spending it. You're paying your future self. Break it down, it's about Rs 1,400 per day - less than many people's daily lifestyle spending. The magic lies in compounding. The earlier you start, the less you invest, and the more you gain. Delay by even 5 years, and the same Rs 5 crore goal will demand Rs 79,000/month instead, as per Kirang Gandhi, a Pune-based Financial Mentor.

Start Small, Retire Big: The Step-Up SIP Strategy for Wealth Creation

Achieving Rs 5 crore by retirement is possible with a disciplined strategy. A monthly SIP of Rs 50,000 in equity mutual funds, with a 12% annual return, might build to Rs 5 crore in around 20 years. For people who are unable to begin at this level, step-up SIPs-in which the contribution increases annually with income-provide a viable alternative, as per CA Niresh Maheshwari, Director of Wealth Wisdom India Pvt. Ltd. The key is consistency and long-term commitment. Returns may vary, but consistent investment and progressive increases in line with income growth can considerably boost wealth accumulation. SIPs should be considered as a long-term financial habit, not a short-term market strategy.

Delay By 5 Years, Pay 66% More: The Power of Early Retirement Investing

The foundation of retirement planning lies in a high savings rate, not high returns. Ideally, 40% of income must go into savings, with around 25% (60% of overall savings) going towards retirement savings. Moving beyond the thumb rule, there are multiple factors such as age, present salary, required corpus and retirement age that govern the basic tenets of retirement planning.

For example, if you are looking for a retirement corpus of Rs 5 Crore at the age of 60 and you are in your 20s, you can let the compounding drive maximum returns for you. In their 20s, investors have much higher risk-taking capabilities and go for all-equity portfolios with decent allocations to small-cap and mid-cap. As you move into your 30s, allocation shifts towards mainly large caps, while if you are 40s, equity allocation must go down over the years, all the way to retirement, said Karan Aggarwal, Co-founder and CIO of Elever, a quant-based PMS and portfolio manager.

Monthly SIPs needed are a function of the first SIP contribution date and the retirement date. A person starting at the age of 25 can build a retirement corpus of 5 crore by the age of 60 years with a monthly contribution of barely Rs 15000. On the other hand, a person starting at the age of 30 would need Rs 25000 - a delay of 5 years led to 66% higher SIP. If you further delay retirement planning to the age of 40, the monthly SIP would zoom to Rs 68000. Here, one must also consider that in later years, 40 and above, returns might be lower due to lower risk-taking capability, as per Karan Aggarwal. In general, unless a person is investing money into activities such as home purchase/start-up/educational course, retirement SIPs must not be delayed beyond the age of 35.

From Rs 10K To Rs 7.9 Crore: This SIP Strategy Really Works

Everyone wants to retire rich, but the question is, how do you get there? If your goal is Rs 5 crore, the earlier you start, the easier it becomes. Mr. Amit Suri - Founder of Aum Wealth said, for example, if you begin investing at age 30 and aim for a 12% return, just Rs 14,100 a month can get you there. But if you wait till 35, you might need to invest more than Rs 25,000 every month. That's a big jump. What really helps is a step-up SIP where you increase your investment by 10% each year. Even if you start with Rs 10,000 a month, with 10% regular step-ups, your corpus could grow to almost Rs 7.9 crore in 30 years. It's a great reminder that time and consistency matter more than trying to find the 'perfect' investment.

It's Not About How Much You Invest-It's About When You Start

To build Rs 5 crore through SIPs, the earlier you start, the less you need to invest each month, thanks to the power of compounding. For example, if you are 25 and can get a 15% annual return, investing just around Rs 5,000 per month could help you reach around Rs 5 crore by the age of 60. At an 18% return, even Rs 2500 monthly might be enough to hit the goal, keeping the investment age the same. Here both cases, we have considered the investment horizon of 35 years as per Trivesh, COO Tradejini. If someone missed starting early and is now in their 35s, they would need to invest over Rs 12,000 per month at 18% return and Rs 20,000 per month at 15% return -assuming similar returns-until the age of 60. The difference in starting age drastically changes the amount required, highlighting that your investment horizon, not just money, is your biggest advantage.

Of course, 15%-18% is an optimistic return range and assumes long-term market discipline and proper fund selection. Don't stop or pause your SIP just because the market is down. That is when you actually buy more units at lower prices. But it is achievable with a consistent, diversified approach and patience, according to Trivesh.

SIPs are not about timing the market; they are about time in the market. Let your money do the hard work while you stay consistent and patient.

Why Mutual Funds via SIP?

• Mutual funds are ideal for retirement planning:
• Low cost (only expense ratio applies)
• No taxes until profits are booked (benefits of long-term compounding)
• Easy diversification and access to equity markets
• SIPs enforce discipline and reduce timing risk

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.