A 25-year-old investor can accumulate ₹3,64,92,972 in the next 20 years through a disciplined monthly SIP of ₹9,000, potentially providing a monthly pension of ₹2 lakh post-retirement at 45 through a Systematic Withdrawal Plan (SWP) for the next 40 years. According to tax and investment expert Jitendra Solanki, an investor can plan to retire at 45 by investing in a mutual fund SIP in monthly mode, accumulating a retirement corpus from a single investment instrument. However, after retiring at 45, they need to invest the entire amount in SWP, which offers around 7% returns to investors, enabling them to beat annual inflation.
To achieve this maturity amount by the time the 25-year-old investor turns 45, they need to increase their monthly SIP by 15%. As reported by SEBI-registered tax and investment expert Jitendra Solanki, in normal conditions, an investor takes a 10% annual SIP step-up, but if someone wants to retire at 45, it is advised to maintain an annual step-up of 15%. Pankaj Mathpal, CEO & MD at Optima Money Managers, explained that equity mutual funds offer a monthly SIP with an annual step-up, but many people choose an annual step-up, leading to almost half of the amount they could have accumulated by opting for the annual step-up.
The investor can use the maturity amount to get a monthly pension after retirement by investing the entire ₹3.65 crore in SWP for the next 40 years. According to Jitendra Solanki, today, ₹40,000 per month is an amount enough for a lower middle class senior citizen. Assuming 7% annual inflation, including healthcare and education, one would require around ₹2 lakh per month after 20 years. Pankaj Mathpal of Optima Money suggests that senior citizens with some risk appetite can expect 6-7% annual return on their SWP, which will help them to beat the annual inflation, assuming a life expectancy of 85 years.
Using a mutual fund calculator with assumptions of 15% annual return on a monthly SIP of ₹9,000 with 15% annual step-up for the entire period, the investor would accumulate around ₹3,64,92,972 or ₹3.65 crore at the time of retirement. If the investor invests this entire amount in SWP for the next 40 years, they can expect to get a ₹2 lakh monthly pension and a contingency fund of ₹6,73,41,557 or ₹6.73 crore for any medical emergency. As reported by Mint, this strategy enables an investor to pre-pone retirement ahead of normal retirement age.
