Turn Rs12.5 Lakh Into a Lifetime Payday: Monthly Income Via One-time Investment: Long-term investments that generate monthly income via one-time (lump sum) investments may be an ideal way to build up retirement wealth while simultaneously producing monthly payments for decades – for instance a Rs 12,50,000 one-time investment may generate an estimated monthly income of nearly Rs 2.188,000 over 30 years! Understand more how it might work!
Retirement investing through long-term investing is an effective way of building up an adequate corpus that will take care of your requirements upon retirement. Even small investments with long investment horizons can contribute to creating this corpus; and once it has been created it can be distributed stepwise over years rather than all at once; saving it from share market fluctuations or interest rate cuts while providing monthly income over years – this write up shows you how investing Rs 12 50,000 could potentially provide estimated monthly income of about Rs 2,18800 over 30 years! Learn about it’s possibility!
Short vs long term investment decisions
Investment can take any length of time depending on your goals; when talking about retirement corpus building however, investing over an extended time frame is best as small investments made early can go further and reach their retirement corpus goals faster. See examples –
Are You Seeking Rs 6 Crore Through SIP Investments with Annualized Growth Expectation of 12 Percent? If this is your target goal, monthly SIP investments offering annualised growth of 12 percent could provide the means.
Short versus Long-term Investment Strategy
Let’s see the estimated monthly amount if we want to create it over 25 and 35 years. In terms of SIP investments alone, 35 years could require approximately Rs 10,888 every month which would bring your total investment up to Rs 4572960 in 35 years.
Over 25 years, Rs 1.05 Crore can be generated with an SIP investment of Rs 35249 monthly and totaling to an investment of approximately 1,05,74,700 in overall investments.
Corpus creation from smaller to greater amounts
Now apply this logic to one-time (lump sum) investments: Create a Rs 5 crore corpus over 25-35 years with annualized rate of return of 12 per cent by investing a one-off sum now and reap annualized rate of return of 12 percent per annum from one investment made all at once.
Corpus Generation from Small Amounts
To build one in 25 years would require an initial investment of Rs 29,41,200; to generate one over 35 years requires an estimated initial outlay of Rs 946,980.
What Is Systematic Withdrawal Plan in Mutual Funds (SWP)
An SWP allows an investor to invest a set amount in one mutual fund scheme and withdraw it every month over an agreed upon term, withdrawing both principal and growth. Each time this withdrawal takes place, units from that mutual fund house are sold to match up to what was requested from its investor.
Planning with SWP for retirement.
SWP can assist in retirement planning by investing a sum into mutual funds and asking their fund house to send out fixed monthly installments of money as inflation escalates over time. In addition, an investor may request increases each year as inflation takes hold.
Retirement Planning with SWP
SWP funds may prove effective because most retirees do not require large sums at retirement; rather, they want regular monthly income that comes from SWP accounts.
Calculations for Story
Our calculations will take place over two steps. In phase 1, a one-time investment at 12 per cent annualised return would grow into a mutual fund scheme in 30 years with post tax corpus invested into another mutual fund scheme for SWP purposes producing estimated monthly income estimated to reach nearly Rs 2,18,000 over 30 years – meaning if an investor in their 25s made such an initial one-time investment and let it grow until age 55 could potentially draw on this income until 85th age.
Build retirement corpus starting from Rs 12,50,000 one-time investment within 30 years.
Within 30 years, an initial investment of Rs 12,50,000 could yield an estimated retirement corpus of Rs 3.74.49.903 with estimated capital gains totalling up to approximately Rs 3.61.99.99903.
Income taxes due on retirement accounts
Since a lump sum investment will remain active for more than 12 months, any profit earned would qualify as long-term capital gain (LTCG), subject to long term capital gain tax and subject to an exemption amounting to Rs 1,25,000 on gains; any further profits must pay 12.5 per cent tax.
With exemption, an estimated taxable income would be Rs 3,60,74,903.
Tax on retirement corpus
At 12.5 per cent tax rates, total income taxes would amount to Rs 45,09,362.875 with post-tax retirement funds totalling Rs 3,29,40,540.125.
SWP Calculations
To achieve our savings goal of Rs 3,29,40,540.125 we plan on investing the sum in a conservative or debt mutual fund and expect an annualised return of 7 percent – this conservative strategy allows for maximum retirement security while at the same time taking less risk with our retirement planning investment strategy.
Earn monthly income with SWP corpus
From our post-tax corpus we anticipate monthly income for 30 years at approximately Rs 2,17,883 monthly income per annum.
Total withdrawal in 30 years: USD 40 Million.
At an estimated annual growth rate of 7 per cent, withdrawal from this amount would yield approximately Rs 7.84.37.8880 with estimated remaining balance estimated as Rs 306 after withdrawals are taken out.
