SIP+SWP: How to get Rs 25K, Rs 50K and Rs 75K monthly pension through systematic withdrawal plan

We need a stable income at old age since it's the stage of your life when you are probably left with no job but still have expenses to meet. There are also chances that your expenses may increase in old age due to medical expenses or care. At such a stage, it is important that you plan your retirement from the beginning of your career. Starting to invest early gives you an edge since you may build a greater retirement corpus than if you start investing late. In your journey to retirement planning, the combination of a systematic investment plan (SIP) and a systematic withdrawal plan (SWP) can be effective investment tools.

While SIP in a mutual fund may help you build a sizeable retirement corpus, SWP may help you get a decent monthly pension.

If one invests even a small amount, such as Rs 2,000, and gets a 12 per cent annualised return on their investment, they can build a corpus of Rs 37.95 lakh in 30 years.

If one invests this fund in a conservative debt mutual fund and gets a five per cent return on the investment, they can get a monthly pension of Rs 20,000 for 30 years through SWP.

In this write-up, you will learn how much you have to invest in a SIP and then invest that amount in a mutual fund(s) to get a monthly pension of Rs 25,000, Rs 50,000, and Rs 75,000 through SWP. 

How to use SIP to build corpus?

In SIP, you make an investment in a mutual fund(s).

This amount can be fixed, or you may increase or decrease the amount as per your investment capacity.

Since SIP provides compounding, the longer the duration of your investment, the greater your retirement corpus can be.

So, even if you invest Rs 2,500 a month through SIP and get a 12 per cent annualised return on your investment, in 25 years, your investment will be just Rs 7,50,000, but your maturity value will be Rs 47,44,088.

If you continue investing for another five years, i.e., a total 30 years, your investment will be Rs 9,00,000, but your maturity value will be Rs 88,24,784.

Now, if you invest this amount in an ultra conservative debt mutual fund where you get just a five per cent return on your investments, you can easily get a monthly pension of Rs 25,000 or more.

Know how!

How to get Rs 25,000 monthly pension

Starting to invest early may help you a great deal.

So it's better to start when you are between 25 and 30 years of age.

As in the above example, we showed you that a Rs 2,500 monthly SIP can help you accumulate Rs 47,44,088 in 25 years if you get a 12 per cent annualised return on your investments.

Now, after 25 years, you can invest that amount in a mutual fund where you get a five per cent annualised return.

A five per cent return is not much, but since we want to use the amount to get a monthly pension as a retiree, you can't take a risk on that amount to invest in a mutual fund(s), where the returns are high but which have a high possibility of being hit by market fluctuations.

So, opting for an ultra conservative debt fund can be your option.

Now, if you invest Rs 47,44,088 in a mutual fund that gives you five per annual return, you can get a Rs 25,000 pension through that for 30 years.

After withdrawing that pension, you will still have Rs 3,02,212 in balance.

How to get Rs 50,000 monthly pension

Here, you need to double the amount of your monthly SIP investment.

Instead of Rs 2,500 a month, you need to make a Rs 5,000 monthly investment for 25 years.

If you get a 12 per cent annualised return on your investments, you are estimated to get Rs 94,88,175 on an investment of Rs 15,00,000.

Now, if you invest Rs 94,88,175 in a mutual fund that gives you five per annual return on that amount, you can get a Rs 50,000 monthly pension for the next 30 years.

After withdrawing that pension, you will still have Rs 6,04,420 in balance.

How to get Rs 75,000 monthly pension

Here, you need to make a Rs 7,500 monthly investment for 25 years.

At a 12 per cent annualised return, your estimated corpus after 25 years of investment will be Rs 1,42,32,263.

If you invest that amount in a mutual fund and get a five per cent return on that, you can get a Rs 75,000 monthly pension for 30 years.

After that duration, your estimated balance amount will be Rs 9,06,633.