Monthly Income From Mutual Fund Lump Sum: Mutual funds invest in equity, assets, and commodities. Such funds can be equity, hybrid, or debt. Investors use them to diversify their portfolio, create a corpus for retirement, and other financial goals. An investor may invest in one or many mutual funds to create a retirement corpus. They can invest in an equity, hybrid, or debt fund, or if they want, they can make their portfolio heavy with one of them.
For retirement, long-term investment planning can be useful, where an investor gives sufficient time for their investments to grow.
After achieving their financial goal, they may withdraw the entire amount in one go.
But if they want, they may withdraw it in phases through a systematic withdrawal plan (SWP) in a mutual fund.
Using the combination, one may get an estimated monthly income of nearly Rs 59,000 for 30 years after making a one-time investment of Rs 3,50,000. Know how it may be possible.
Mutual fund investment for retirement planning
One can start a periodic (systematic investment plan, SIP) in a mutual fund or can make a lump sum (one-time investment).
It may depend on their income cycle or the amount that they have in hand.
Either way, it is ideal if they have a long-term investment horizon.
It will help them mitigate market risk. At the same time, the power of compounding will help them create a large corpus from a small amount.
Systematic withdrawal plan (SWP)
It’s a way to withdraw a large amount from a mutual fund.
An investor invests an amount in a mutual fund scheme and asks the fund house to sell net asset value (NAVs) of a fixed amount every month and deposit it to their account.
Many investors use SWP for their retirement planning.
Calculations for story
Mutual fund lump sum Investment- Rs 3,50,000
Investment duration- 30 years
Annualised investment return- 12%Â
SWP annualised return- 7%
Retirement corpus from Rs 3,50,000 one-time investment
At a 12 per cent annualised return, long-term capital gains from the investment will be Rs 1,01,35,973, and the estimated corpus generated will be Rs 1,04,85,973. Â
Income tax on retirement corpus
The investor will get a Rs 1,25,000 tax exemption on this corpus. After that, a 12.5 per cent tax will apply.
The taxable capital gains after a Rs 1,25,000 tax exemption will be Rs 1,00,10,973; the estimated tax on this corpus will be Rs 12,51,371.625.
Post-tax corpus will be Rs 88,84,601.375. This is the estimated amount that will be used for SWP.
Monthly income from SWP investment
At a 7 per cent annualised return from the corpus, the estimated monthly income that one may withdraw from the same corpus will be Rs 58,766.
The total withdrawal in 30 years will be Rs 2,11,56,581, and the estimated balance will be Rs 821.
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)Â
