Monthly Income From One-time Investment: How Rs 16,00,000 mutual fund lump sum deposit can generate Rs 2,79,000 monthly income for 30 years

A retirement corpus should be large enough to create sufficient passive income for the retirement period. If you consider your retirement phase to be 20 years, your corpus should not run short for this period, considering that inflation will keep rising. For such a corpus, one may start a periodic or one-time investment. The ideal condition to create a large corpus from a small amount is to begin your investment journey early.

It is possible if one makes a one-time investment early in their career. Suppose a 25-year-old is targeting their retirement by 50 years of age with a retirement corpus of Rs 5 crore. They are expecting a 12 per cent annualised return on their investment. They can create the corpus with a one-time Rs 29,41,200 investment. But if they delay their investment by 5 years, they'll need a one-time investment of Rs 51,83,400. 

Many investors with a large one-time investment opt for a mutual fund investment. Here, they need to invest their amount one time and sit back. They need to review it after every few months to keep a tab on growth. A long-term investment horizon is suitable for such an investment. 

It's a method to withdraw an amount from a mutual fund scheme periodically. When one creates a corpus, or when they have a large sum and don't want to withdraw the amount in one go, they may opt for SWP. 

The other benefit is that if the share market is not going through a good phase and your corpus has dipped, the systematic withdrawal of the same can save it from market fluctuations to quite a large extent. 

Here you invest a lump sum amount in a mutual scheme and ask the fund house to deposit a fixed amount in your account. The fund house sells net asset value (NAV) units of the same amount from your investment and deposits the amount to your account. While you withdraw the amount, your investment also grows. 

In the story, we will show how a one-time investment of Rs 16,00,000 in an equity mutual fund scheme can help you create a fund of around Rs 4.80 crore in 30 years at a 12 per cent annualised return. 

In the second step, we will show how the post-tax corpus at a 7 per cent annualised return can help you generate an estimated monthly income of around Rs 2,79,000 a month for 30 years. So, if an investor is 25 years old, they can see their investment grow till age 55, and they may get around Rs 2,79,000 a month till the age of 85.

At a 12 per cent annualised return, the estimated capital gains will be Rs 4,63,35,875, and the estimated corpus will be Rs 4,79,35,875.

Long term capital gain (LTCG) tax will apply on this corpus, where the investor will get a Rs 1,25,000 exemption on capital gains. After that, the gains will be taxed at a 12.5 per cent rate. After an exemption of Rs 1,25,000, taxable capital gains will be Rs 4,62,10,875.

The total estimated tax on this corpus will be Rs 57,76,359.375. Post-tax corpus will be Rs 4,21,59,515.625.

The SWP corpus will be Rs 4,21,59,515.625. It will be invested in a hybrid or a debt fund because we want to be conservative in our approach to retirement planning, as investing the amount in an equity fund will put it at risk because of market uncertainty. 

The estimated monthly income generated from this corpus will be Rs 2,78,860.

The estimated withdrawn amount in 30 years will be Rs 10,03,89,600, and the remaining corpus will be Rs 1,983.