Creating a retirement corpus is essential for every individual. With strategic investments, individuals can make a retirement fund that can help them live a life free from any tension or worries. Systematic investment plans (SIP) can help with the creation of a retirement fund through systematic investments in various assets. On the other hand, systematic withdrawal plans (SWP) can help create a fixed income allowing individuals to withdraw from their retirement fund regularly. Using both SIP and SWP, individuals can accumulate the necessary retirement corpus which is sufficient for their future needs. The following article explores the best way to calculate SIP investments and SWP withdrawals helping investors immensely:
1. Calculation of the retirement corpus
The first step that individuals must take before going for SIP investments is to calculate the total retirement corpus they require. Various factors like monthly expenses, future inflation rate, duration of the retirement, and the expected returns must be factored in to calculate the total amount of the retirement fund. Ascertaining a required some for retirement can help investors move further with the process of planning systematic investment plans. With the right calculation, an individual can arrive at the required figure that can help them in their living period and retirement period free from any kind of worries.
2. Use of systematic investment plans to create a retirement fund
Individuals can use a simple formula to calculate their SIP amount. It is as follows:
FV=P×r(1+r)n−1×(1+r)
Here:
P is the monthly SIP investment
r is the monthly return
n is the period of investment in months
Therefore, by using the above-mentioned formula, individuals can easily calculate their SIP amount. With the selection of the right fund for investment and the required rate of return, individuals can create a retirement corpus that is perfect for future requirements. For example, with a retirement fund of ₹5 crores to be created in 25 years with an expected rate of return of 12%, individuals can start investing ₹15,000 – ₹20,000 per month for their SIPs. Individuals can even take the help of a dedicated SIP investment calculator which serves as an online tool to calculate the SIP amount. By providing various details like total retirement corpus required, expected rate of return, total period of investment and the fund of investment, an SIP amount can be ascertained easily.
3. Calculation of systematic withdrawal
After ascertaining the SIP amount and creating a retirement corpus, individuals can use the below mentioned formula to calculate their SWP amount.
SWP=1−(1+r)−nC×r
Here:
r is the monthly return on investment
n is the total duration of withdrawals in months
Therefore, by using the above-mentioned formula, individuals with a retirement corpus of ₹5 crores and with an annual return of 7% can withdraw a sum of ₹2 lakhs per month for 25 years. One can even use a dedicated SWP calculator to arrive at the SWP amount which they can withdraw from their retirement corpus as a fixed income.
Conclusion
A SIP calculator can help ascertain the amount of a systematic investment plan. On the other hand, an SWP calculator can make the identification process of withdrawal amount easy and hassle-free. Using a SIP and SWP calculator, the monthly SIP investment and SWP withdrawal amount can be arrived at without any kind of difficulty.