555 SIP Formula: How to get over Rs 5 cr corpus, Rs 2.37 lakh monthly pension

Priya Vishwakarma

Sep 15,2024

Suppose you are 25 years old and start depositing Rs 10,000 every month into a SIP.

Also, assume an average return of 12 per cent on your investments until retirement. Now, let's delve into how the 'Triple 5' formula works.

The first 5 in the Triple 5 formula means retiring five years earlier. 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 keep investing like this continuously, then by the age of 55 you will have a fund of Rs 5.28 crore. That means, a small change in SIP and you can retire before time.

Let's assume you start invest Rs 10,000 every month in a SIP and increase it by 5 per cent each year, with an average return of 12 per cent.

Over 30 years, by the age of 55, your total investment will be approximately Rs 79.73 lakhs.

Due to the power of compounding, you will earn around Rs 4.48 crores in interest, resulting in a total corpus of Rs 5.28 crores.

After paying long-term capital gains tax, even with a conservative interest rate of 6 per cent on an FD at the time of retirement, you will still receive a substantial pension.

On a post tax corpus of Rs 4.74 crores, you will earn around Rs 28.42 lakhs annually at 6 per cent, equating to approximately Rs 2.37 lakhs per month.

Know Full Calculation

Investing in equity mutual fund Rs 10,000 monthly SIP, 5% annual step up SIP, 12% return, investing for 30 years Total investment = Rs 79,72,662 Long-term capital gains = Rs 4,47,61,398 Total value = Rs 5,27,34,060 Total Corpus = Rs 52734060 Corpus that will be taxed = Rs 52634060 10% long-term capital gains tax = 5263406.00 Corpus after tax = 52634060-5263406 = Rs 47370654 6% (FD) annual income on Rs 47370654 = 2842239.24 Monthly income = 2842239.24/12 = Rs 236853.27