Can a pension like income be generated after the age of 50 with just a SIP of Rs 1,000 per month? The answer is yes, if you invest continuously for a long time and later use SWP (Systematic Withdrawal Plan) properly.
First 25 years: Build funds through SIP
Suppose you started a SIP of Rs 1,000 every month at the age of 25.
Time: 25 years (from 25 to 50 years of age)
Average return: 15% per annum
The total investment will be in 25 years
1,000 × 12 × 25 = Rs 3 lakh
If you get returns of 15%, then by the age of 50 your fund can be around Rs 27.56 lakh. That means by investing just Rs 3 lakh you can make a corpus of more than Rs 27 lakh. This is the power of compounding.
Next 25 years: Every month income from SWP
Now at the age of 50, you shift this Rs 27.56 lakh to any debt mutual fund or conservative hybrid fund. Suppose the average annual return from here is 7.5%. If you withdraw Rs 20,000 every month and do so for 25 years (from 50 to 75 years of age), the total withdrawal will be Rs 20,000 × 12 × 25 = Rs 60 lakh. Still, more than Rs 2 lakh can be saved. That means your money will continue to give you Rs 20,000 every month for 25 years.
Why SIP + SWP is better?
- Opportunity for more growth than equity in the first phase
- Facility of regular income later
- Better tax efficiency than FD
- Income can be increased or decreased as needed
- Money does not stop completely, investment continues
to bear in mind
After 25 years, the value of Rs 20,000 will not be the same as today, because inflation keeps increasing. But this income can become a big support in your retirement. The biggest lesson is that the amount may be small, but if you invest consistently and for a long time, the same small SIP can generate a big pension-like income in the future.