Retirement Planning: Combination of SIP + SWP; Rs 15,000 monthly SIP for 25 years and Rs 1,52,000 monthly income for 30 years
Retirement Planning (SIP+SWP): Building a retirement corpus is a long-term process. A person creates a large corpus by investing step by step, and instead of withdrawing this corpus at once and paying tax on it, he can withdraw it in stages.
Similarly, a combination of Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP) can be used to build a corpus and withdraw that amount in the form of monthly income through Systematic Withdrawal Plan (SWP).
In this article, know how this combination can work and with a monthly SIP investment of Rs 15,000 for 25 years, one can build a fund big enough to withdraw Rs 1,52,000 a month for 30 years.
How SIP helps in creating retirement corpus
A person starts a SIP in a mutual fund for a long term, like 15 years or more.
They let the corpus grow and get the benefit of compounding.
In SIP investment, they don’t need to invest time.
To ensure that they need consistent returns, they need to continually review their investment strategy.
How SWP helps to generate monthly income
Once a large retirement corpus is created, the investor can invest that money in a liquid fund or wherever an annual return of 6 percent is possible.
Since one also gets growth from SWP investments, he can withdraw a larger monthly income from the corpus than his monthly SIP investment.
Investment conditions
The figure has an example of Rs 15,000 monthly SIP for 25 years. The annual return on this investment will be 12 percent. The investment period will be 25 years.
What will the corpus be in 25 years?
The investment in 25 years will be Rs 45,00,000, the estimated wealth gain will be Rs 2,10,33,099, and the expected value will be Rs 2,55,33,099.
What will be the conditions of the SWP?
A corpus amount of Rs 2,55,33,099 will be invested in a mutual fund where the expected annual return will be 6 percent.
What will be the monthly income?
With that return on retirement corpus, one will get an income of around Rs 1,52,000 every month for 30 years.
What will be the total amount withdrawn?
The total disbursement will be Rs 5,47,20,000. After this withdrawal, the estimated balance will be Rs 3,25,291.
