SIP and SWP: A Wonderful Combo

Having a financial goal is an essential aspect of personal finance. A Systematic Investment Plan or SIP is a simple and effective way to accumulate the corpus needed to achieve your financial goals. Furthermore, combining SIP with a Systematic Withdrawal Plan or SWP can produce even more substantial benefits.

A SIP is an investment made periodically in a financial instrument on a fixed date. On the other hand, an SWP is the withdrawal of a fixed amount periodically on a fixed date. By investing regularly through SIP and withdrawing through SWP, you can ensure that your money works for you and is readily available when you need it.

Let us explain how much you can withdraw if you invested through SIP and use SWP for withdrawal. For easy calculation, let's assume you have invested Rs. 25,000 per month in a financial instrument earning 12% p.a. returns. Once the corpus is accumulated, you transfer the entire accumulated corpus to a conservative financial instrument like a liquid fund, which earns 6% p.a. returns.

Key points

1. If you invest your money for 15 years, you can withdraw approximately three times the invested amount every month until you reach the age of 80. However, if you increase the investment duration by an additional five years, you can withdraw approximately six times the monthly investment amount every month.
2. If you invest until age 55, you can withdraw 12 times your monthly investment every month from age 55 to 80.
3. If your monthly expense is Rs. 60,000 at the age of 30, you can ensure that your future expenses are covered from the age of 60 to 80 years by investing Rs. 25,000 per month. This assumes that your expenses grow at a rate of 6% per annum and the investment is made until the age of 60.

Conclusion

It is crucial to plan in advance to achieve your financial goals. The longer you invest, the greater the compounding benefit you can receive. Do not underestimate the role of a Systematic Investment Plan (SIP) in helping you reach your financial goals. By combining SIP with a Systematic Withdrawal Plan (SWP), you can yield wonderful results and withdraw the amount over an extended period with ease. So, take charge of your finances and make the smart move today!