With rising life expectancy in India and increasing awareness of financial tools, more people are now exploring different savings-cum-retirement plans. At the same time, there are many who want to take a modern approach by using mutual funds not just to build wealth, but also to earn a steady income during their golden years. This story explains one such strategy: a combination of SIP (systematic investment plan) and SWP (systematic withdrawal plan) that can help you retire at 50 with a solid corpus and a reliable income stream later.
SWP allows you to take out a fixed amount from your investment at regular intervals. You can think of it as your pension. In a SIP, you put money in every month. In an SWP, you take money out every month. This is especially useful for retired people who want a regular income to meet their expenses.
Let’s assume you are 30 years old and plan to retire at 50. We will look at a simple mutual fund investment strategy using SIPs for wealth creation and then an SWP for withdrawals, ensuring a fixed monthly income after retirement.
In simple terms, an SWP converts your accumulated savings into a stable and predictable monthly income.
For example, if you start investing Rs 10,000 per month through an SIP at age 30 and continue for 20 years, your investments may grow to around Rs 1 crore by the time you turn 50.
If you then start an SWP from this Rs 1 crore, you could receive a monthly income of around Rs 65,000 for the next 20 years, without exhausting your fund. Even after those 20 years, your balance could still be above Rs 1 crore. In short, this strategy offers regular income, peace of mind, and long-term financial independence.
Many mutual fund schemes have given annual returns of 12–15% over 15 to 20 years. Here, we assume a conservative 12% annual return for our calculations.
SIP calculator for 20 years
Monthly SIP: Rs 10,000
Investment duration: 20 years
Estimated return: 12% per annum
Value after 20 years: Rs 1 crore
SWP calculator for 20 years
Now, assume you invest Rs 1 crore in a good hybrid or balanced fund with an estimated return of 8% per year and plan to withdraw Rs 65,000 every month:
One-time investment: Rs 1,00,00,000
Investment duration: 20 years
Estimated return: 8% per year
Monthly withdrawal: Rs 65,000
Total interest over 20 years: Rs 1.63 crore
Total withdrawals over 20 years: Rs 1.56 crore
Balance after 20 years: Rs 1.07 crore
(Source: SIP, SWP calculator)
This means your investment would earn Rs 1.63 crore in interest, giving you a total of Rs 2.63 crore. If you withdraw Rs 65,000 every month for 20 years, you would still have around Rs 1.07 crore remaining, which can be used in later years.
Note: If inflation is around 5% per year, you can choose to increase your SWP withdrawals by 5% every year to maintain your purchasing power. This calculation does not include inflation.
Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.
Note: This content has been translated using AI. It has also been reviewed by FE Editors for accuracy.