Want to earn Rs 40,000 per month pension? Invest Rs 5,000 via SIP

SIP and SWP are two significant strategies for mutual funds. In this post, we will show you how to withdraw Rs 40,000 each month with SWP by investing in a monthly SIP of Rs 5,000.

Mutual funds are one of the finest alternatives for retail investors. This is good for those investors having no time for researching individual securities. Mutual funds have two essential strategies at their disposal: SIP and SWP.

A Systematic Investment Plan (SIP) allows you to invest a certain amount on a regular basis for a set period. Periodicity might be daily, weekly, monthly, quarterly, or yearly. SIPs are very useful for instilling the habit of disciplined investment.

A Systematic Withdrawal Plan (SWP) allows withdrawal over a while. Using this tool aids in withdrawing the needed amount. This happens without halting the growth of the unwithdrawn amount.

The challenge now is how to earn Rs 40,000 per month by investing Rs 5,000 per month. Assume you put Rs 5,000 in a SIP that generates 10 per cent returns for the following 25 years. In 25 years, this translates to Rs 62.16 lakh.

After 25 years, you invest this Rs 62.16 lakh in a mutual fund portfolio that yields roughly 8 per cent returns. Then, beginning in the 26th year, you can withdraw Rs 40,000 per month for the following 40 years.

This method is best appropriate for retirement goals. This is because most people's income after retirement is on the low side. But this is only if you are no longer working.

Furthermore, retirement expenditures are on the higher end. This is amid the prevalence of health concerns. Even health insurance grows more expensive as you get older, not to mention a slew of limitations.