If your dream is to become a millionaire before retirement, saving alone is not enough. Long-term and smart investment is crucial. That's why experts recommend including Public Provident Fund (PPF) and Systematic Investment Plans (SIPs) in your portfolio.

But if a specific strategy is adopted with these two schemes, the results can be astonishing. We are talking about the Triple 5, or 555 formula, which, if started at the right age, can make you a millionaire by the age of 55. Let's understand how this magical formula works.

What is the 555 (Triple Five) formula?

The 555 formula is not magic, but a formula of discipline and planning. This formula can make you a millionaire by the age of 55. This formula works differently for SIPs and PPF.

How does the 555 formula work in SIPs?

In this formula for SIPs, the first two fives refer to the age of 55, and the last 5 refers to 5%. That's why it's called the 555 formula. If you want to become a millionaire by the age of 55 through SIPs, then:

Start investing at the age of 25.

Continue the SIP for 30 years, i.e., until the age of 55.

Increase the SIP amount by 5% every year.

Let's understand the SIP calculation with an example:

Suppose you started a SIP of ₹5,000 at the age of 25. The next year, you increase it by 5%, i.e., ₹250, so the SIP in the second year will be ₹5,250. In the third year, increasing it by 5% again, the SIP will be ₹5,512. Similarly, you have to continue investing by increasing the current amount by 5% every year. This process will continue until the age of 55.

How much corpus will be generated from SIPs?

If you continue the SIP until the age of 55, the total investment will be ₹39,86,331. With an average annual return of 12%, you will earn ₹1,93,92,756 in interest alone, and the total corpus will be ₹2,33,79,087. This means that by the age of 55, you can become the owner of a fund worth more than ₹2 crore.

How does the 555 formula apply to PPF?

In PPF, the meaning of 555 is slightly different. Here, it's a 5+5+5 strategy.

Original PPF tenure = 15 years

Extension in 5-year blocks, 3 times after maturity

Total investment period = 30 years

If you start a PPF account at the age of 25, this scheme can build a strong fund for you by the age of 55.

How much do you need to invest in PPF?

To become a millionaire through PPF:

Annual investment: ₹1 lakh to ₹1.5 lakh

₹1 lakh annually means ₹8,334 per month

₹1.5 lakh annually means ₹12,500 per month

The more you invest, the stronger the fund.

Calculation for ₹1 lakh annual investment:

Total investment in 30 years = ₹30,00,000

Current interest rate = 7.1%

Interest earned = ₹73,00,607

Total maturity amount = ₹1,03,00,607.

What will you get with a ₹1.5 lakh annual investment?

Total investment in 30 years = ₹45,00,000

Interest earned = ₹1,09,50,911

Total maturity amount = ₹1,54,50,911.

How to extend your PPF account?

To extend your PPF account, you need to apply to the bank or post office.

The form must be submitted within 1 year of the maturity date.

The form must be submitted to the same branch where the account was opened.

If the form is not submitted on time, you will not be able to invest further. Significant tax-saving benefits

PPF falls under the EEE category.

Tax exemption on investment

Interest is completely tax-free

Maturity amount is also tax-free, meaning tax savings in three ways.

Important points to keep in mind:

The government reviews the PPF interest rate every 3 months.

Returns may vary if the interest rate changes in the future.

SIP is market-linked, and a 12% return is estimated.

Returns may fluctuate due to market volatility.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.