Retirement Planning Through SIP+SWP Investment Strategy: Rs 16,000 monthly SIP for 25 years, then Rs 1,81,000 monthly income for 30 years
SIP+SWP Investment Strategy: For retirement planning, you may need a significant amount since you need to beat inflation post retirement. But early investing can solve the problem a great deal. The combination of Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP) can work wonders.
SIP+SWP Investment Strategy: If you are 30 years old and thinking about creating a retirement corpus, you need to consider that even if you want to live the same lifestyle that you currently have, you need quite a large monthly amount to beat inflation. At 6 per cent average annual rise in inflation, if your monthly expenditure is Rs 50,000 today, the estimated expenditure at the age of 60 will be Rs 2,87,175. The solution to gathering a corpus that can help you sustain through your retirement life is starting to invest early in your career. In this write-up, know about how the combination of a systematic investment plan (SIP) and a systematic withdrawal plan (SWP) may help one get Rs 1,81,000 monthly income for 30 years if they make Rs 16,000 monthly SIP investment for 25 years.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for retirement planning.)
Retirement corpus through mutual fund SIP
For a professional, depending on their month-to-month pay cheque, saving and investing is not an easy deal. But SIP in a mutual fund(s) provide them the flexibility of starting investing with as little as Rs 100. The investor can increase the amount as their income increases. Consistent investing in the long term can help them generate a sizeable corpus.
Benefits of early investing
The early investor gets more years for compounding of their investment compared to a late starter. The sooner one starts, the higher their corpus is likely to be. A delay of 10 years in investing can cost one dearly in creating a sizeable retirement corpus.
How SWP works
When you create a retirement corpus, you may not want this entire corpus in one go. Or, you don't want to invest it in a market-linked scheme where the investments can go down during market fluctuations.
How SWP works
So, a better way can be to invest it in a debt mutual fund, where there is least risk with your investment, and from where you can withdraw money systematically through SWP.
How to create corpus with Rs 16,000 monthly SIP
The duration of the investment will be 25 years. So, if one is 25 years old, they can invest till 50. The rate of annualised growth will be 12 per cent.
What will be retirement corpus through SIP investment?
The investment in 25 years will be Rs 48,00,000, estimated capital gains will be Rs 2,55,62,161, and the estimated total value will be Rs 3,03,62,161.
Investment for SWP
So, the estimated corpus at 50 years of age will be Rs 3,03,62,161, which can be invested in a debt mutual fund.
SWP investment conditions
Here, we are expecting 6 per cent annualised returns from SWP investment. We want to withdraw monthly income for 30 years. So, we can say that the life expectancy is 80 years.
What will be monthly income from SWP investment?
The estimated monthly income from this investment will be Rs 1,81,000 that one can withdraw for 30 years.
What will be monthly income from SWP investment?
The total withdrawn income will be Rs 6,51,60,000, and the balance after withdrawing that income will be Rs 1,32,089.
Will that pension be sufficient for lifelong?
That's the reason one should calculate their retirement corpus and plan their investments according to that. They need to increase their investments as their income increases.