Retirement planning often seems difficult and distant to people. But if invested properly, even a small investment can turn into a huge amount in the future. The combination of SIP and SWP can create your own pension.
This strategy means make regular investments, increase the investment every year and later get regular income from the same money.
Suppose you start investing at the age of 30 and invest Rs 10,000 every month in SIP. Now let's increase this amount by 10% every year. That means, as your salary increases, you also increase your investments. If you do this for 20 years and get an average annual return of 15%, your fund can reach around Rs 2.5 crore.
Benefit of compounding: The return on investment also earns further returns.
Rupee Cost Averaging: The average cost remains balanced even when the market goes up and down.
Discipline: It is easier to invest a little bit every month.
By increasing your SIP every year, your final fund becomes much bigger, because more money works for longer time.
After 20 years, when your fund reaches Rs 2.5 crore, you can withdraw money every month through SWP. Suppose you withdraw Rs 2 lakh every month and get 8% return on the remaining money. In this way, you can get an income of around Rs 2 lakh per month for 20 years and even after this you can still have around Rs 45 lakh left.
In this method, first you make money from SIP and later take income from the same money from SWP.
This entire plan is based on the assumption of 15% and 8% returns, which is not necessary to be achieved all the time. Returns may change depending on the market. If you start investing on time, do SIP regularly and with discipline and gradually increase your investment, you can make a huge amount in 20 years. Later, you can strengthen your financial security by taking income from the same money every month.
