Monthly Income From One-time Investment: How Rs 16,49,999 one-time investment can provide Rs 2,87,000 monthly income for 30 years
Monthly Income From One-time Investment: Having a regular income at retirement can help one have a comfortable life where they don't need to worry about their daily expenses. A Rs 16,49,999 lump sum (one-time investment) may lead to an estimated monthly income of over Rs 2,86,000 for 30 years. Know how a mutual fund lump sum and systematic withdrawal plan (SWP) may work!
Monthly Income From One-time Investment: Having a comfortable retirement life may be expensive given the rising inflation. Your expenses may remain the same, decrease, or increase, but in all cases, you need a substantial amount to live life comfortably. That amount may come from an income source or return from investments. Making an investment that can generate passive income may serve the purpose for regular retirement income. One may generate it through the mutual fund lump sum (one-time) investment, where they can create a corpus and then withdraw a regular monthly income through the systematic withdrawal plan (SWP). Know how a one-time investment of Rs 16,49,999 can create a corpus that may help you withdraw an estimated monthly income of over Rs 2,86,000 for 30 years.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
In how many years, can one create retirement corpus?
There is no specific time period to it. It's about the retirement corpus goal amount and earning years. But starting to invest early can help one generate a corpus with a smaller amount compared to when they start investing late. Let's see a couple of examples.
Rs 5 cr corpus in 20 years vs 30 years
If an investor wants to create a Rs 5 crore corpus through a mutual fund one-time investment where the annualised return from their deposit is 12 per cent. Here are the estimated amounts they require to achieve this financial goal.
If they want to achieve it in 20 years, their estimated one-time investment will be Rs 51,83,400.
Rs 5 cr corpus in 20 years vs 30 years
But if they want to achieve it in 30 years, the estimated one-time investment will be Rs 16,69,000.
Here, you can see that if a person starts their investment journey 10 years earlier, they need 1/3rd the investment compared to if they begin 10 years later.
Rs 6 cr corpus through SIP investment in 35 and 30 years
Here we will show how one may save a substantial amount to build a Rs 6 crore corpus through SIP investment if they start their monthly SIP investment journey just 5 years earlier. The aim is to create a Rs 6 crore corpus at a 12 per cent annualised return in 30 and 35 years.
If they want to achieve it in 35 years, the estimated monthly SIP amount will be Rs 10,888, and the overall will be Rs 45,72,960.
Rs 6 cr corpus through SIP investment in 35 and 30 years
But if they want to accomplish it in 30 years, the estimated monthly SIP amount will be Rs 19,480, and the overall will be Rs 70,12,800.
The lesson here is that starting your investment journey a few years earlier may help you save a significant amount.
SWP investment
SWP is a method to withdraw an amount periodically from a mutual fund. In SWP, when you invest a lump sum amount in a mutual fund scheme, you direct the fund house to provide a fixed monthly income. The fund house sells net asset value (NAV) units of the same amount from your investments to provide you that income. In such a way, even when you are withdrawing an amount from the mutual fund, it is also growing. If the rate of withdrawal is slower than the rate of growth, the amount may provide you a monthly income for decades.
Example of SWP
If an investor invests Rs 50 lakh in a mutual fund from where the annualised return is 7 per cent, the estimated monthly income that they can draw for 15 years is Rs 44,500.
Calculations for story
We will show how a one-time investment of Rs 16,49,999 can generate a corpus in 30 years that may generate a monthly income of over Rs 2,86,000 for 30 years. So, if a person is 25 years old, they may generate a corpus by 55 years and may withdraw an estimated monthly amount of over Rs 2,86,000 for the 30 years.
Corpus from Rs 16,49,999 in 30 years
In 30 years, estimated capital gains will be Rs 4,77,83,843, and the estimated corpus will be Rs 4,94,33,842.
Income tax on retirement corpus
On an estimated Rs 4,94,33,842 corpus, long term capital gains (LTCG) tax will apply where the tax exemption on capital gains will be Rs 1,25,000. After the exemption, the tax rate on the remaining capital gains will be 12.5 per cent.
Income tax on retirement corpus
After a Rs 1,25,000 exemption, the taxable income will be Rs 4,93,08,842.
At a 12.5 per cent tax rate, the estimated tax will be Rs 61,63,605.25, and the post-tax estimated corpus will be Rs 4,32,70,236.75.
SWP investment amount
The estimated SWP investment will be Rs 4,32,70,236.75. We will invest in a hybrid or a debt fund from where we are expecting a 7 per cent annualised return.
Monthly income from corpus
The estimated monthly income that can be generated from this corpus will be Rs 2,86,205.
Total withdrawn amount
The estimated withdrawn amount in 30 years will be Rs 10,30,33,800, and the estimated balance after withdrawing that amount will be Rs 4,191.