Building a large retirement corpus from a small-amount investment look dreamy until you know the maths, follow the right investment strategy, have patience and maintain consistency in investing. Similarly, creating a Rs 5 crore retirement corpus from a salary of Rs 50,000 may appear to be an uphill task until you know the investment amount, required return, duration and deploy the right strategy to achieve it. From Rs 50,000 salary to Rs 5 crore corpus: How many years it may take A salaried person can follow two principals to gather a substantial corpus- they should invest a portion of their salary every month and should also increase their investment amount with a rise in their income. If they don’t increase their investment amount with a rise in their income, the target to achieve a Rs 5 crore can take more than three decades if someone invests 30% of their Rs 50,000 monthly salary in a systematic investment plan (SIP) and gets a 12% annualised return on it. Years to achieve Rs 5 crore corpus by investing 30% of Rs 50,000 monthly salary Particulars Amount SIP amount Rs 15,000 Annualised return 12% Years to achieve Rs 5 cr corpus 31 Thirty-one year is a long time. One may not have a job for such a long time or may not give this much time to achieve their retirement goal. So, to fast-track the process, the other way around can be to increase the investment amount with a rise in your income. For example, if the same person with a Rs 50,000 monthly salary invest 30% of their pay in a month, increases their investment amount by 7% every year and gets a 12% annualised return, the Rs 5 crore retirement corpus can be achieved in 26 years instead of 31. If they increase their initial SIP investment amount to Rs 17,000, they can achieve the Rs 5 crore corpus goal in 25 years. Years to reach Rs 5 crore retirement corpus Particulars Amount Amount Step-up SIP Rs 15,000 Rs 17,000 Annual step-up (increase) 7% 7% Annualised return 12% 12% Years to reach Rs 5 cr corpus 26 years 25 years Calculator used: Groww Starting with a slightly higher step up SIP amount, you can see that one can achieve the Rs 5 crore corpus target in 25 years, but here comes the next big questions. What percentage of your salary should you invest every month. Should it be 10%, 20, 30% or higher? Is there a thumb rule for that? What percentage of salary should you invest monthly? Gurmeet Singh Chawla, director, Master Capital Services, told ET Wealth Online there is no fixed rule for how much of one's salary should be invested, but he suggests setting aside at least 20-30% of monthly income toward savings and investments to build long-term wealth. “Those with bigger financial goals like reaching a multi-crore corpus may need to push that number higher, closer to 30-40%, as income grows over the years,” says Singh. Vijay Kuppa, CEO, InCred Money, and Rohan Goyal, investment research analyst, MIRA Money, both suggest following the 50-30-20 rule where 50% of your take-home goes to needs, 30% to wants, and 20% to savings and investments. But Kuppa says if one doesn’t have many expenses at home or doesn’t have many liabilities, they can go for a higher investment percentage such as 50% of their salary. “If you are in your 20s and live with your parents, your fixed expenses, rent, food, utilities, are either zero or minimal, then instead of defaulting to the 50-30-20 split, consider investing 40% to 50% of your salary,” says Kuppa. Here, is an illustration of how increasing your investment percentage from 10% to up to 50% at a Rs 50,000 monthly salary can create significantly higher corpuses in 25 years. Corpus in 25 years if you invest 10%-40% of your Rs 50,000 monthly salary (at 7% annual step up, 12% annualised return Percentage of salary to be invested monthly Corpus created in 25 years 10% Rs 1.47 cr 20% Rs 2.95 cr 30% Rs 4.47 cr 40% Rs 5.91 cr But if your monthly salary is Rs 1 lakh or Rs 2 lakh and you aim to achieve a retirement corpus of Rs 5 crore given the same conditions of 7% annual step up and 12% annualised return, you can achieve a Rs 5 crore corpus much earlier. Assuming Rs 1 lakh/month salary, years to reach Rs 5 cr corpus at different percentages of salary (at 7% annual step up, 12% annualised return) Percentage of salary to be invested monthly Years to reach Rs 5 cr corpus 10% 29 20% 24 30% 21 40% 19 Assuming Rs 2 lakh/month salary, years to reach Rs 5 cr corpus at different percentages of salary (at 7% annual step up, 12% annualised return) Percentage of salary to be invested monthly Years to reach Rs 5 cr corpus 10% 24 20% 19 30% 17 40% 15 But even if two individuals of the same age and salary start their investment journey simultaneously for a Rs 5 crore corpus, should they invest in the same assets such as equity funds, or their asset allocation should be different from each other? How will you decide about asset allocation? Kuppa suggests your investment choices can depend on your willingness and capacity to take a risk. “Your willingness to take a risk is emotional: can you watch your portfolio drop by 30% and not sell? Your capacity to take a risk is financial: do you have income stability, time horizon and the absence of near-term liabilities to absorb a loss? Both must align,” said Kuppa. But if you have decided the asset allocation, which investment method should you pick- a simple SIP, a step up SIP, lump sum or a mix of either two or all? SIP, step up SIP or lump sum: Which strategy to pick? Chawla says all three are good, but for an investor, they work in different situations. “A regular SIP brings in the discipline of putting money every month, stepping up that SIP amount even by a small percentage makes a surprisingly large difference to the final corpus, and when a bonus or unexpected income comes along, parking even a part of it as a lump sum can give the overall investment a solid boost,” explains Chawla. Now, if your investment method is also in place, how sure are you get expected returns and achieve the retirement corpus goal in time. A periodic review of your investments can help you achieve your goal on time. If you deploy strategies through which get returns better than expected, you can also achieve your retirement corpus well in advance. Returns matter a lot in the long term For investors with a long-term investment horizon, experts suggest investing in equity as returns from it can help one beat inflation, but investors can choose a conservative strategy as per their risk appetite. However, to make the most of the investment, one should review their investments, as even one per cent higher annualised return can help one achieve the investment goal much earlier than the targeted time. Presenting an example, Kuppa says if someone starts a Rs 10,000 step up SIP with a 10% annual step, they can achieve a Rs 5 crore corpus four years earlier if they get 14% annualised return instead of 10%. Starting SIP Annual investment increase (step up) Annualised return Years to reach Rs 5 crore corpus Rs 10,000 10% 10% 29 years Rs 10,000 10% 12% 27 years Rs 10,000 10% 14% 25 years Calculation: Vijay Kuppa, CEO, IncredMoney Building a sizeable corpus from a salary is not an easy task. It needs patience, right selection of investments and methods, periodic increase in investment and regular review of the investment portfolio. It’s an important financial goal for most of us. So, one needs to strategise it property so that they don’t miss achieving the goal.Calculator used: Groww