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Half of India is unaware of the SIP '30-35-40' formula. Learn how starting an investment at the age of 30, 35, or 40 can help you easily build a fund of ₹1 crore by the time you turn 50.

SIP Formula: Building a retirement corpus of ₹1 crore by age 50 is no longer difficult, provided you start investing at the right time. If you expect an annual return of 12% through equity mutual fund SIPs, your monthly installment amount is determined by your age. Financial experts state that the earlier you start investing, the less money you need to contribute from your own pocket.

How much should the monthly SIP be at ages 30, 35, and 40?

If your goal is to accumulate ₹1 crore by age 50, your monthly SIP amount based on the starting age would be as follows:

Starting at age 30 requires a monthly investment of just ₹10,875, whereas starting at age 40 raises this amount to ₹46,640. In other words, a delay of 10 years causes your monthly installment to increase approximately 4.28 times.

What is a Step-up SIP, and how does it reduce the initial financial burden?

Increasing your SIP amount by 5% annually in line with your rising income is known as a 'Step-up SIP.' Assuming a 12% annual return and a 5% annual step-up, the initial investment required is significantly lower:

At age 30: Starting at ₹7,850 per month
At age 35: Starting at ₹16,160 per month
At age 40: Starting at ₹37,130 per month

This approach allows you to easily reach your ₹1 crore goal, even by investing a smaller amount during the initial years.

Normal SIP vs. Step-up SIP: Which is better for you? The biggest advantage of a step-up SIP is that it places less financial strain on you initially. As your salary or income rises, you can easily manage a 5% increase in your contribution.

Why is delaying your investment detrimental?

According to historical data from Value Research, large-cap funds have delivered an average return of 11.76% over 10 years, while mid-cap and small-cap funds have yielded 15.50% and 16.76%, respectively. Although past performance does not guarantee future results, an average return of 12% can reasonably be expected. The power of compounding works effectively only when you give the market sufficient time. Therefore, rather than delaying, it is wise to start today to achieve your target of ₹1 crore.