Monthly Income From One-time Investment: How Rs 14,00,000 one-time investment can generate Rs 2,44,000 monthly income for 30 years

When a person retires, their expenses don't stop. They may decrease, or they may increase in some cases, but they need a regular income to meet their expenses. To meet those, it is necessary to have a source of income from which one may withdraw an amount every month.

They may have a rented property. They have a business, or they may have a pension plan or investment from where they can generate a regular income. Such an income is required for life. 

They may invest in fixed interest assets such as fixed deposits, corporate and government bonds, or market-linked assets such as stocks and mutual funds. The purpose should be to build a corpus from these investments, which can work as a regular passive income source post retirement. 

When we build our retirement corpus, we need to know that it should beat inflation. Since taxation policies keep changing, one should keep revising their retirement planning strategy.

One may build their retirement corpus through long-term mutual fund investment. They may pick a mix of equity, hybrid, and debt portfolios to mitigate market risk. A long term is required since compound growth of their investment can help them build a large corpus from a small amount.

E.g., if one invests Rs 10 lakh for 30 years and gets a 12 per cent annualised return from their investments, estimated capital gains from it will be Rs 2,89,59,922, and the estimated corpus will be Rs 2,99,59,922. 

Most people have a monthly earning cycle, so it may be suitable for them to make a monthly SIP investment. However, in this case also, a long-term investment horizon can help them build a large corpus. Let's take the example of a Rs 10,000 monthly SIP investment for 30 and 35 years at a 12 per cent annualised return.

In 30 years, the total investment will be Rs 36,00,000, estimated capital gains will be Rs 2,72,09,732 and the estimated corpus will be Rs 3,08,09,732.  In 35 years, the total investment will be Rs 42,00,000, estimated capital gains will be Rs 5,09,08,311 and the estimated corpus will be Rs 5,51,08,311. Such a phenomenal change in just 5 years happens because of the power of compounding. 

Our calculation will have 2 stages. In the first phase, we will calculate the retirement corpus built from a Rs 14,00,000 one-time investment in 30 years at a 12 per cent annualised return. In the second stage, we will show how one may get over Rs 2,44,00/month income for 30 years from the post-tax corpus. So, if an investor invests Rs 14,00,000 lump sum in a mutual fund scheme and lets it grow till they turn 55, they may generate an estimated monthly income of over Rs 2,44,000 till they turn 85.

In 30 years, at a 12 per cent annualised return, estimated capital gains will be Rs 4,05,43,891, and the estimated corpus will be Rs 4,19,43,891.

Long-term capital gain (LTCG) tax will apply on this retirement corpus. The corpus will have a tax exemption of Rs 1,250,000. On the rest of the corpus, LTCG tax applicable will be 12.5 per cent. After the Rs 1,25,000 exemption, the taxable income will be Rs 4,04,18,891. The estimated income tax on this corpus will be Rs 50,52,361.375, and the estimated post-tax corpus will be Rs 3,68,91,529.625.

Rs 3,68,91,529.625 will be the estimated SWP corpus. We will invest this corpus in a conservative hybrid or a debt fund, from where we are expecting an annualised return of 7 per cent. We will be conservative with this investment since this is meant for retirement, and we need to take a minimum risk on the amount.

The estimated monthly income that one may generate from this corpus for 30 years will be Rs 2,44,016.

In 30 years, the total withdrawn corpus will be Rs 8,78,45,760, while the balance will be Rs 1,025.