WEALTH CREATION THROUGH MUTUAL FUNDS

Building Wealth From Salary: A Dual-Scenario Retirement Strategy for Rohan

Client Profile & Assumptions

  • Name: Rohan Mehta

  • Current Age: 32 years

  • Retirement Age: 60 years (Investment horizon of 28 years)

  • Starting Monthly Salary: ₹1,20,000 with an expected 8% annual increment

  • Existing Equity Mutual Fund Portfolio: ₹6,00,000

  • Assumed Rate of Return: 12% p.a. on both new SIPs and existing investments

Scenario 1: Wealth Creation via a Fixed % of Salary

This scenario projects the total wealth Rohan can accumulate if he starts by investing 10% of his current monthly salary (₹12,000/month) as a Systematic Investment Plan (SIP), increasing his investment amount by 8% every year in line with his salary increments.

The Numbers:

  • Total Salary Received (over 28 years): ₹13,72,87,915

  • Total New Investment via SIP: ₹1,37,28,791

  • Wealth Created via SIP: ₹5,84,32,619

  • Growth of Existing Investment: ₹1,43,30,320

  • Total Projected Retirement Corpus:₹7,27,62,939

Key Insight: By simply allocating 10% of his growing income, Rohan’s total retirement corpus can reach over ₹7.27 crore. The step-up feature (linking SIPs to annual salary raises) drastically maximizes his wealth creation without straining his current lifestyle.

Scenario 2: Savings Required for a Target Corpus

While Rohan’s initial thought was a ₹5 crore target , this calculation evaluates what is required to hit a more ambitious target retirement corpus of ₹10,00,00,000 (₹10 Crore).

The Numbers:

  • Starting Monthly SIP Required: ₹17,594

  • Required Savings Rate:14.66% of his current salary

  • Total New Investment Till Age 60: ₹2,01,28,161

Key Insight: Rohan does not need to invest aggressively to hit the ₹10 crore mark. Because compounding does the heavy lifting on both his existing ₹6 lakh portfolio and his step-up SIPs, a starting investment of roughly 15% of his salary is completely sufficient.

Final Roadmap & Recommendation

Rohan is in an incredibly strong position to secure a comfortable retirement. The definitive recommendation to move forward is:

  • Aim for the 15% Mark: Instead of starting at 10% (which yields ₹7.2 crore) , Rohan should optimally start his monthly SIP at ₹17,594 (approx. 15% of his current salary).

  • Automate the Step-Up: He must ensure his mutual fund SIPs are set to automatically increase by 8% every year. This ensures that as his salary grows, his wealth accumulation effortlessly stays ahead of inflation.

  • Leave Existing Assets Untouched: The existing ₹6 lakh equity portfolio is projected to grow to over ₹1.43 crore on its own. Keeping this bucket strictly cordoned off for retirement is vital to achieving these final milestones.

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