Home / Money / Personal Finance /  SIP calculator: Can a 30 year old retire at 55 with 5 lakh monthly pension?
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Mutual funds SIP calculator: Reetesh is a 30 year old earning individual who want to retire at the age of 55. However, before retirement, he wants to accumulate ample retirement fund that can help him get around 5 lakh monthly income for next 30 years. He is ready to take market risk but he is not in mood to make any direct stock market investment. According to tax and investment experts, this investment goal is achievable through mutual fund investments but Reetesh will have to make some adjustment in his investment from time to time.

Pension calculator

Speaking on how much retirement fund will be required to get 5 lakh monthly pension for next 30 years; Pankaj Mathpal, Founder & MD at Optima Money Managers said, "For regular monthly income post-retirement, SWP (Systematic Withdrawal Plan) is a better suited option. Assuming CAGR (Cumulative Average Growth Rate) of 8 per cent per annum on the retirement corpus, around 7 crores will be required to get 5 lakh per month for 30 years."

Pankaj Mathpal of Optima Money said that a lot of people like Reetesh are investing in equity mutual funds instead of direct stock markets and getting good return in their money. He said that investors, who are in the nascent phase of their career or say around 30 years of age, can opt for Systematic Investment Plan (SIP). He said that one can start mutual fund SIP at any time as the investor would get average return on one's investment.

On how much return one can expect from mutual funds SIP for 25 years, Pankaj Mathpal asked investors to remember 15 X 15 X 15 rule of mutual funds. He said that the rule says that one can expect 15 per cent return on one's SIP for 15 years or more. As the investment horizon is 25 years, one can expect to get around 15 per cent return on one's investment.

Mutual fund calculator

On how to keep monthly SIP at lowest level and achieve this 7 crore investment goal; Kartik Jhaveri, Director — Wealth at Transcend Capital said, "At the age of 30, monthly SIP that an earning individual can afford would be 8,000 to 10,000. But, this won't be enough to achieve this 7 crore target in simple plain SIP investment. The investor will have to enhance one's monthly SIP with increase in one's income. So, one should use annual step-up in one's SIP."

On how much annual step-up would be enough to meet this 7 crore investment goal; Kartik Jhaveri of Transcend Capital said, "Normally, 10 per cent annual step-up in SIP is advisable but to retire 5 years before the normal 60 years of age, one will have to keep it around 15 per cent annual step up."

Mutual fund return calculator

Assuming 15 per cent return on one's mutual funds SIP for 25 years, mutual fund SIP calculator suggests that one requires around 8,000 monthly SIP with 15 per cent annual step-up to achieve 7 crore investment goal.

As per the mutual fund SIP calculator, if an investor starts 8,000 monthly SIP, using 15 per cent annual step-up for next 25 years, the investor can accumulate 7.45 crore at 15 per cent annual mutual fund return.

Source: piggy SIP calculator
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Source: piggy SIP calculator

Asked about SWP plans that can yield 8 per cent per annum, Pankaj Mathpal of Optima Money Managers listed out the following:

1] ICICI Prudential Balanced Advantage Fund;

2] Aditya Birla Sun Life Balanced Advantage Fund;

3] Nippon India Balanced Advantage Fund; and

4] Axis Balanced Advantage Fund.

Disclaimer: The views and recommendations made above are those of individual analysts or personal finance companies, and not of Mint.

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