Saving ₹20 Daily Can Yield ₹6 Lakh Monthly Pension After Retirement

Accumulating Wealth Through Smart Investing

For individuals seeking to become millionaires or billionaires, a key aspect of their success lies in their ability to invest wisely. A smart investor would not only invest in a mutual fund Systematic Investment Plan (SIP) but also maximize its value by generating income from their pension fund. This ensures that their wealth sustains for a longer period.

A mutual fund SIP calculator suggests that a normal investor starting a monthly equity mutual fund SIP of ₹6,000 and maintaining it for 30 years will accumulate ₹4.20 crore. However, if an investor increases their monthly SIP in sync with their annual income, they can accumulate almost twice as much as a typical investor.

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.

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Maximizing Wealth Through Systematic Withdrawal Plan (SWP)

A SWP can be a good option for senior citizens to generate a steady income. Assuming a 7% return on one's SWP, an investor who invests ₹9 crore in a SWP plan can expect to receive a monthly pension of ₹6 lakh and a contingency fund of ₹2.64 crore for any medical emergency.

Importance of SIP Step-Up Plan

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The SIP step-up plan is crucial in accumulating wealth. According to Pankaj Mathpal, CEO & MD at Optima Money Managers, almost half of the amount that could be accumulated by opting for the annual step-up is lost by choosing an annual step-up. Jitendra Solanki, a SEBI-registered tax and investment expert, suggests that a 10% annual SIP step-up has a significant impact on one's net sum at the time of redemption, especially in a long-term time horizon of 30 years or more.

Accumulating ₹9 Crore and Generating a Monthly Pension

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. This amount can be used to generate a monthly pension after retirement.

According to Jitendra Solanki, ₹6 lakh would be an ideal monthly pension for a lower middle-class senior citizen, assuming 8% annual inflation, including healthcare and education. Pankaj Mathpal of Optima Money suggests that an investor can expect 7-8% annual return on one's SWP, which will help them to beat the annual inflation.