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Mutual Fund SIP calculator: Genius doesn't do different things; they do things differently. Similarly, a smart investor becomes a millionaire or a billionaire by investing wisely. For example, if a normal investor starts a monthly equity mutual fund SIP of ₹6,000 and keeps doing it religiously for 30 years, it will accumulate ₹4.20 crore. However, like a smart investor, if someone increases their monthly SIP in sync with their annual income, they can accumulate almost twice as much as a typical investor.
But to maximise the value of one's wealth, a smart investor would try to generate income from one's pension fund, which must sustain for a longer period. Hence, a mutual fund SIP can be a good source of income for retirees, and a SWP (Systematic Withdrawal Plan) can be a good option for senior citizens.
According to the mutual fund calculator used in this calculation, if an investor starts a monthly mutual fund SIP of ₹6,000 for 30 years, using a 10% annual SIP step-up for the entire period and expecting a 15% annual return, the investor would accumulate around ₹9 crore at the time of retirement. Then, expecting a 7% return on one's SWP, if the investor invests ₹9 crore in a SWP plan, they can get a monthly pension of ₹6 lakh and a contingency fund of ₹2.64 crore for any medical emergency.
Speaking on how a smart investor accumulates much more than a normal equity mutual fund investor, Pankaj Mathpal, CEO & MD at Optima Money Managers, said, “Equity mutual funds offer a monthly SIP with an annual step-up offer. However, a few people choose an annual step-up. This leads to almost half of the amount which they could have accumulated by opting for the annual step-up.”
On how much annual SIP step-up an investor can opt for, SEBI-registered tax and investment expert Jitendra Solanki said, “In normal conditions, an investor takes a 10% annual SIP step-up. This has a significant impact on one's net sum at the time of redemption because in a long-term time horizon of 30 years or more, one can expect at least 15% annual return on one's money.”
Assuming a 15% annual return on a mutual fund SIP of ₹6,000 per month, with an annual step-up of 10%, the SBI Securities mutual fund calculator suggests that one would be able to accumulate ₹9,01,33,619 ( ₹9.01 crore) after 30 years.
So, if an earning individual aged around 30 years starts a monthly SIP of ₹6,000 by saving ₹20 per day and increases it by 10% per year for the next 30 years, it would accumulate around ₹9 crore at the age of 60.
The investor can use this maturity amount to get a monthly pension after retirement. What they need is to invest this entire ₹9 crore in SWP for the next 25 years.
On how much monthly income would be required after 30 years, Jitendra Solanki said, “Today, ₹50,000 per month is an amount which is enough for a lower middle class senior citizen. Assuming 8% annual inflation, including healthcare and education, one would require around ₹5 lakh per month after 30 years. Including some miscellaneous expenses and some regular medical expenses that take place after retirement, one can assume that ₹6 lakh would be an ideal monthly pension for a lower middle-class senior citizen.”
Batting in favour of SWP, Pankaj Mathpal of Optima Money said, “An investor can expect 7-8 per cent annual return on one's SWP, which will help him or her to beat the annual inflation. And assuming the life expectancy of 85 years, then a senior citizen needs to plan for the next 25 years post-retirement.”
If a 30-year-old investor accumulates ₹9 crore in the next 30 years and invests this ₹9 crore in SWP for the next 25 years, post turning 60, then one can expect to get ₹6 lakh monthly pension and a contingency fund of ₹2.64 crore, which can be used for any big medical emergency.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
Asit Manohar has nearly two decades of experience in the mainstream media. In this period, he has served esteemed media organisations like NDTV Profit, The Economic Times, and Zee Business. He has been working at LiveMint Digital since April 2021. During these two decades of journey in mainstream media, Asit has mainly covered external affairs, markets and personal finance. However, his earliest beats include railways, SME, MSME, and politics (Congress beat). Some of his features on political, economic, and foreign policy are documented in the parliamentary records. <br><br> While pursuing his MA (Mass Communication, Session 2004-06), Asit began his media career as a stringer at All India Radio in Varanasi. At AIR Varanasi, Asit worked with the Gyanvani, Yuvvani and Vividh Bharti teams. After working for nearly one year at AIR Varanasi, he shifted to print journalism and started working as a stringer for the HT Media Ltd, Varanasi. At HT Media Ltd in Varanasi, he covered the BHU beat. <br><br> Asit has also worked with some brokerage houses. He has worked with Religare Broking and India Infoline, where he assisted the research team in developing and executing trade strategies for intraday cash, F&O, and commodities. <br><br> Asit is a Gold Medalist in MA (Mass Communication) from BHU, Varanasi. He did his BSc. (Hons) in Mathematics from Magadh University, Bodh Gaya. Asit was a National Talent Scholarship holder during his senior secondary studies (1988-91).
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