Earn 2 lakh rupees per month with a SIP of Rs 10,000, understand the 10-15-20 formula
By starting a monthly SIP of Rs 10,000 and increasing the investment annually, you can build a substantial corpus over 20 years. Subsequently, through SWP, you can generate a regular income of around Rs 2 lakh per month from this fund.
Retirement planning often seems daunting and distant. However, if invested correctly, even a small investment can turn into a substantial sum over time. A combination of SIP and SWP can essentially create your own pension.
What is the 10-15-20 formula?
This strategy means making regular investments, increasing the investment every year and later getting regular income from the same money.
Step 1: Build a corpus through SIPs
Suppose you start investing at the age of 30 and invest Rs 10,000 per month in a SIP. You now increase this amount by 10% every year.
This means that as your salary increases, you increase your investment. If you do this for 20 years and earn an average annual return of 15%, your corpus could reach approximately Rs 2.5 crore.
Why is SIP beneficial?
The benefit of compounding: Investment returns generate further returns. Rupee cost averaging: Average costs remain stable even when the market fluctuates. Discipline: Investing a small amount every month is easier.
Advantages of Step-Up SIP
Increasing your SIP every year makes your final corpus much bigger, as more money works for a longer period.
Step 2: Income from SWP
After 20 years, when your corpus reaches ₹2.5 crore, you can withdraw money every month through SWP. Suppose you withdraw ₹2 lakh every month and earn an 8% return on the remaining amount. This way, you can earn around ₹2 lakh per month for 20 years, and still have around ₹45 lakh left over.
Why is SWP better?
- Get regular income every month
- The amount can be changed as per the requirement.
- Tax is levied only on profits
- The remaining money remains invested and keeps growing.
- SIP + SWP = Your Own Pension
In this method, first you make money through SIP and later get income from the same money through SWP.
- The initial years: Investing through SIPs
- The Middle Years: Increasing Investments
- Retirement: Income from SWP
to bear in mind
This entire plan is based on the assumption of 15% and 8% returns, which are not necessarily guaranteed. Returns can vary depending on market conditions.
If you start investing on time, follow SIPs regularly and with discipline, and gradually increase your investments,
you can build a substantial wealth in 20 years. Later, you can strengthen your financial security by generating monthly income from that money.