Retirement at 55; monthly income of Rs 2.60 lakh; how it is possible through Triple 5 formula
Systematic Investment Plan (SIP) in mutual funds has become popular since it has given an average of 12 per cent returns in the last few years. If invested for a long time, you can accumulate huge wealth through SIP by investing little amount. SIP can be a popular tool in retirement planning too where long-term investment may not only help you build a strong corpus, but it may also give you an opportunity to have a Rs 2.60 lakh monthly income. It can be possible through Triple 5 formula. We will tell you how-
SIP: Retirement planning is important and should be done from the initial stages of your job. If one invests through a systematic investment plan (SIP) in mutual funds and gets an annualised return of 12 per cent on the invested amount, they can build a huge corpus at the time of retirement at 60. Wealth is accumulated through the power of compounding where you get return on the entire amount and not only the money invested in a year.
If you invest in mutual funds through SIP for the long term and get a return of 12 per cent, you can make a huge retirement corpus, as well as you can get a Rs 2.60 lakh monthly income.
In this write-up, we will tell you how.
A strong corpus is build in retirement planning with the help of compounding.
The real power of compounding is evident when you invest money for a long time.
Let us tell you today one such tip related to SIP, in which, through the Triple 5 formula, not only you can advance your retirement by five years, but can also get a pension of Rs 2.60 lakh a month.
But before we proceed, let's assume a few investment conditions.
Suppose you are 25 years old and are depositing Rs 1000 every month through SIP.
Here, we are also assuming that you will get an average return of about 11 per cent on your investment till the time you retire.
What is the formula of Triple 5?
In Triple 5 formula, the first 5 means retiring five years earlier. Whereas the second 5 means that for this, you will have to increase your SIP by 5 per cent every year.
The third 5 means that if you do this continuously, then by the age of 55, you will accumulate more than Rs 5 crore.
That means with a small change in SIP, you can retire much before 60.
How Triple 5 formula works
Suppose, as a 25-year-old, you start investing Rs 1000 a month through SIP, your investment in a year will be Rs 12,000.
If you increase investment by 5 per cent every year till the 30th year of your investment and get an average return of 11 per cent, your total investment in 30 years i.e. till the age of 55 years will be around Rs 95.67 lakh.
Due to the power of compounding, you will get capital gains of around Rs 4.25 crore.
In this way, your total corpus will be Rs 5.20 crore.
How to get Rs 2.60 lakh monthly pension
Now, you have Rs 5.20 crore corpus.
If you decide it to withdraw the entire amount and invest it in a non market-linked investment option such as fixed deposit (FD), where you get a six per cent fixed annual interest rate, you will get Rs 31.20 lakh return in a year.
If you divide that amount by 12, you will get Rs 2.60 lakh.
It means Rs 2.60 lakh is the monthly pension that you can earn through monthly SIP of Rs 1,000, which will increase by 5 per cent every year till the 30th year of your investment.
Rs 2.60 lakh monthly pension at the age of 55 is a good option! Isn't?
That's possible because of the power of Triple 5 formula.
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