555 formula, magic of compounding: Retirement planning is an important financial goal. But like in many other aspects of life, there should be a proper strategy to achieve a financial goal. It can make post retirement life happy, and the individual will have sufficient retirement corpus to run their expenses throughout the life. The 555 investment formula is one such long-term investment strategy that can help one achieve the retirement financial goal. 

What is 555 formula?

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The first 5 in the formula represents the Rs 5,000 monthly SIP investment from the age of 25.

The second signifies to increase this amount by 5 per cent every year for 30 years.

The third 5 is to retire 5 years earlier than the retirement age of 55.

555 Formula: How one can generate corpus through it

Here, a person has to start a Rs 5,000 monthly step up SIP in a mutual fund scheme.

The investor will increase their yearly SIP investment by 5 per cent. 

The expected return from this investment will be 12 per cent.

The investment period will be 30 years.

555 Formula: What will happen after 30 years?

In 30 years, the total investment will be Rs 39,86,331, the estimated capital gains will be Rs 2,23,80,699, and the expected value of the investment will be Rs 2,63,67,030.    

What if someone invests retirement corpus it to get monthly pension?

If one invests Rs 2,23,80,699 in a fixed deposit (FD) and expects 6 per cent return from that, the estimated monthly income that they get will be Rs 1,11,347.

If they invest that in a debt mutual fund and start systematic withdrawal plan to get monthly income, they can get estimated Rs 1,33,500 a month for 30 years.

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