If you want to earn ₹1 lakh per month in the future, you need to do two important things with your SIP. The first is to increase your monthly investment by 10% each year (step-up). The second is to transfer the accumulated funds to a Systematic Withdrawal Plan (SWP) after reaching retirement age, thereby creating a fixed monthly income, which will eliminate your financial worries.
Investing in mutual fund SIPs is becoming increasingly popular. If you want a good life after retirement, you need to start investing today. But you also need to keep rising inflation in mind. Many people with low salaries think they can't build a large corpus by investing in mutual fund SIPs. But that's not true. If you invest ₹1,000 per month and follow the step-up and systematic withdrawal plans (SWP) correctly, you can earn ₹100,000 per month after retirement.
What is Systematic Withdrawal Plan (SWP)?
Most people are familiar with Systematic Investment Plans (SIPs). However, some may not be familiar with Systematic Withdrawal Plans (SEPs). For them, it's the opposite of SIPs, where you systematically withdraw money from your investments.
This involves selecting a mutual fund and investing a lump sum. Afterward, you can withdraw the money periodically, such as once a month, three months, or six months. During this time, you'll earn interest on the funds invested, providing a regular income.
How to invest for fixed income after retirement?
If you want to earn around ₹1 lakh per month after retirement, i.e. after 60 years, you'll need to invest in a SIP. But there are two important things to consider with this investment.
1. 10% increase in SIP every year
To increase the investment amount and get maximum benefit from compound interest in the long run, you need to increase your investment by 10% every year.
2. Lump-sum investment in SWP after SIP when you invest the money earned from your SIP in a lump sum SWP, you can receive a fixed amount every month and also earn interest on your deposit. Let's understand this with an example.
Imagine you're 25 years old today. Starting today, you're saving ₹1,000 every month and investing it in a Systematic Investment Plan. Nowadays, it's crucial for anyone to save at least ₹1,000 at work.
You increase this investment amount by 10% every year, i.e., Rs 1,100 at age 26, Rs 1,210 at age 27.
After about 35 years, i.e. at the age of 60,
If you earn a 12% annual return, you'll have a total of ₹1.56 crore. At a 15% annual return, this fund will accumulate approximately ₹2.69 crore.
Now the next important thing you need to do is
Choose a debt fund that offers a 5% to 6% annual return. By investing in a fund that earns 12%, you can earn ₹65,000-₹75,000 per month. Investing in a fund that offers a 15% return can earn you over ₹100,000 per month.
If you are over 25 years of age, you can increase your investment amount so that you can receive a fixed monthly income after retirement.
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