1. 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.
2. Even when he starts TIP and SIP together at the age of 35 (earlier the better) for longest possible tenure, he is a winner.
3. As an illustration, let's say he pays 12,000 premium, i.e. 1,000 per month, annually for 30 years, in a TIP of 1 Crore cover.
4. Simultaneously, he invests 60,000, i.e. 5,000 per month, for 30 years, in a SIP of an Aggressive Hybrid fund with returns of, say, just 10% CAGR.
5. Upon his survival, he will earn 1.04 crores after 30 years (i.e. his SIP value corpus).
6. Upon his untimely demise after 5, 10, 15, 20 or 25 years, his family will get 1.04 Cr., 1.1 Cr., 1.2 Cr., 1.36 Cr., or 1.62 Cr. resp. (i.e.TIP benefit + SIP value corpus).
7. TIP + SIP COMBO scores in terms of:-
a) Flexibility in deciding own life cover,
b) Liquidity in MF corpus withdrawal,
c) Lesser mortality charge on life cover,
d) Optimal fund charges and
e) Higher premature death benefits.
8. If he is a taxpayer, he can even opt for an ELSS fund instead, and thus avail dual Sec 80C tax benefits - both on TIP premium and SIP investment - during his entire earning years.
9. 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.
10. A tip:- As all term policies get elapsed without any benefits upon survival, buying multiple policies, by splitting the total cover equally, can enable you to terminate them one by one when your insurance needs come down with age, thus reducing premium costs and leaving more savings in your hand to invest in mutual funds for a bigger retirement corpus.
2. Even when he starts TIP and SIP together at the age of 35 (earlier the better) for longest possible tenure, he is a winner.
3. As an illustration, let's say he pays 12,000 premium, i.e. 1,000 per month, annually for 30 years, in a TIP of 1 Crore cover.
4. Simultaneously, he invests 60,000, i.e. 5,000 per month, for 30 years, in a SIP of an Aggressive Hybrid fund with returns of, say, just 10% CAGR.
5. Upon his survival, he will earn 1.04 crores after 30 years (i.e. his SIP value corpus).
6. Upon his untimely demise after 5, 10, 15, 20 or 25 years, his family will get 1.04 Cr., 1.1 Cr., 1.2 Cr., 1.36 Cr., or 1.62 Cr. resp. (i.e.TIP benefit + SIP value corpus).
7. TIP + SIP COMBO scores in terms of:-
a) Flexibility in deciding own life cover,
b) Liquidity in MF corpus withdrawal,
c) Lesser mortality charge on life cover,
d) Optimal fund charges and
e) Higher premature death benefits.
8. If he is a taxpayer, he can even opt for an ELSS fund instead, and thus avail dual Sec 80C tax benefits - both on TIP premium and SIP investment - during his entire earning years.
9. 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.
10. A tip:- As all term policies get elapsed without any benefits upon survival, buying multiple policies, by splitting the total cover equally, can enable you to terminate them one by one when your insurance needs come down with age, thus reducing premium costs and leaving more savings in your hand to invest in mutual funds for a bigger retirement corpus.