First, let’s set some standards to understand this trick better. Suppose you are 25 years old and start depositing Rs 10,000 in SIP every month. Also, assume an average return of 12 per cent on your investments till retirement. We are saying that this return is minimal, it can also be 15-20%. If this happens, the returns will go up even further. Because market returns sometimes go up and down. Hence you can proceed with an average of 12-15. Note that even if it is 1% less, you will still be able to easily set up a Jugaad of Rs 2 lakh per month. Let us now understand the 555 SIP formula.
What is the meaning of the formula 555?
The first 5 in the Triple 5 formula means retiring five years early. The second 5 means that for that, you will have to increase your SIP by 5 per cent every year. The third 5 means that if you keep investing like this continuously, by the age of 55, you will have a fund of Rs 5.28 crore. That means, a small change in SIP and you can retire early.
Understand the calculation here
Suppose you start investing Rs 10,000 every month in SIP and increase it by 5 per cent every year, giving you an average return of 12 per cent. In 30 years, your total investment till age 55 will be around Rs 79.73 lakh. Due to the power of compound interest, you will earn interest of approximately Rs 4.48 crore, resulting in a total amount of Rs 5.28 crore.
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Even if the FD earns 6 per cent interest at the time of retirement after paying long-term capital gains tax, you will still get an adequate pension. With a post-tax corpus of Rs 4.74 crore, you will earn approximately Rs 28.42 lakh per annum at 6 per cent, which is roughly Rs 2.37 lakh per month.
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