For a young earner, a combination of term insurance plan (TIP) and systematic investment plan (SIP) is ideal for a secured wealth creation over, say, 30 years of his earning life.
(A) TIP + SIP CALCULATION:-
1. Even when an investor starts TIP and SIP together at the age of 35 (earlier the better), he is an all-round winner:-
2. Let's say he pays 12,000 premium, i.e. 1,000 per month, annually for 30 years, in a TIP of 50 lakh cover.
3. Simultaneously, he invests 60,000, i.e. 5,000 per month, for 30 years, in a SIP of an Aggressive Hybrid (erstwhile Balanced) fund with returns of, say, just 10% CAGR.
4. He will earn 1.04 crores after 30 years upon survival (i.e. his SIP value corpus).
5. If he unfortunately dies after 5, 10, 15, 20 or 25 years, his family will get 54 lakh, 60 lakh, 70 lakh, 86 lakh or 1.12 crores resp. (i.e.TIP benefit + SIP value corpus).
(B) TIP + SIP COMBO scores in terms of:-
1. Flexibility in deciding your cover
2. Liquidity in corpus withdrawal
3. Mortality charge of cover
4. Overall fund charges and
5. Higher premature death benefits.
(C) In the above scenario, if he opts for an ELSS fund instead of the Balanced fund, he can also avail dual Sec 80C tax benefits - both on TIP premium and SIP investment - during his entire earning years.
(D) For retirement income upon survival, a regular income stream can also be started through SWP of accumulated MF corpus, suiting his monthly expenses at that time, while letting the MF corpus continue to grow by the power of compounding.
(A) TIP + SIP CALCULATION:-
1. Even when an investor starts TIP and SIP together at the age of 35 (earlier the better), he is an all-round winner:-
2. Let's say he pays 12,000 premium, i.e. 1,000 per month, annually for 30 years, in a TIP of 50 lakh cover.
3. Simultaneously, he invests 60,000, i.e. 5,000 per month, for 30 years, in a SIP of an Aggressive Hybrid (erstwhile Balanced) fund with returns of, say, just 10% CAGR.
4. He will earn 1.04 crores after 30 years upon survival (i.e. his SIP value corpus).
5. If he unfortunately dies after 5, 10, 15, 20 or 25 years, his family will get 54 lakh, 60 lakh, 70 lakh, 86 lakh or 1.12 crores resp. (i.e.TIP benefit + SIP value corpus).
(B) TIP + SIP COMBO scores in terms of:-
1. Flexibility in deciding your cover
2. Liquidity in corpus withdrawal
3. Mortality charge of cover
4. Overall fund charges and
5. Higher premature death benefits.
(C) In the above scenario, if he opts for an ELSS fund instead of the Balanced fund, he can also avail dual Sec 80C tax benefits - both on TIP premium and SIP investment - during his entire earning years.
(D) For retirement income upon survival, a regular income stream can also be started through SWP of accumulated MF corpus, suiting his monthly expenses at that time, while letting the MF corpus continue to grow by the power of compounding.