Invest Rs 25 Lakh to get Rs 4.36 lakh Monthly Income: Invest Rs 25 lakh today and get a monthly income of Rs 4.36 lakh for 30 years from 55 years of age. This may sound unreal, but one may make it possible if they make the most of the power of compounding in their mutual fund investment.
Investing Rs 25 lakh as a lump sum at 25 years of age may help one generate a sizeable corpus by 55 years of age.
Investing the post-tax amount in a separate fund, they may get an estimated monthly income of Rs 4.36 lakh till 85 years of age.
It may be a reality with the help of a mutual fund lump sum investment and a systematic withdrawal plan (SWP). Know how this plan may work out!
Mutual fund lump sum investment to build corpus
Mutual fund lump sum investment is suitable for investors for a long-term investment horizon.
So, it can be used for retirement planning too.
One can invest a substantial amount in the early stage of their career to build a sizeable retirement corpus by their early or late 50s.
The fund can be used to receive a lump sum amount or draw a monthly income during the retirement phase.
SWP for retirement planning
SWP is opposite to SIP. In SWP, an investor invests a lump sum amount in a mutual fund and instructs the fund house to provide them with a periodic income that includes the principal and return.
One may choose any fund to start an SWP plan, but conservative hybrid and debt funds are popular choices for investors seeking a regular income from their investment.
Calculations for story
We will show how an investor can generate a corpus from a Rs 25 lakh lump sum investment in a mutual fund and how, after paying tax on the same corpus, they may invest it in a separate fund to draw a monthly income.
In this way, if one invests Rs 25 lakh in a mutual fund at 25 years of age, they may create a retirement corpus by 55 years of age.
From the same corpus, they may draw a monthly income for the next 30 years. Know how it may work out!
Retirement corpus from Rs 25 lakh investment in 30 years
Total investment- Rs 25,00,000
Estimated capital gains- Rs 7,23,99,805
Estimated corpus- Rs 7,48,99,805
Income tax on corpus
Since the investment duration is more than 12 months, long term capital gain tax (LTCG) will apply on capital gains. There will be an Rs 1,25,000 tax exemption on the capital gains, after which,
LTCG will be taxed at 12.5 per cent.
Taxable capital gains- Rs 7,22,74,805
Estimated income tax- Rs 90,34,350.63
Post-tax retirement corpus- Rs 7,48,99,805-Rs 90,34,350.63= Rs 6,58,65,454.37
SWP investment to get Rs 4.36 lakh/month income
Rs 6,58,65,454.37 will be the estimated amount to invest in a conservative hybrid or debt mutual fund from where the expected annualised return will be 7 per cent.
SWP investment- Rs 6,58,65,454.37
Expected annualised return- 7 per cent
Estimated monthly income- Rs 4,35,650
Balance- Rs 16,127
Total withdrawn amount in 30 years- Rs 15,68,50,127
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)