Monthly Payout From One-time Investment: Investing one time early in life and getting an estimated Rs 348,500/month income from age 55 for the next 30 years may make your post-retirement journey easy. Passive income, not just for a few years but for decades, may fulfill many of your financial needs.

Once you achieve this stage, you may need to worry about income flow for life once your retirement age starts.

But how you may achieve it after making a Rs 19,99,999 mutual fund lump sum investment.

How your such investment may help generate an estimated Rs 3,48,500 monthly income for 30 years.

See how the combination of a mutual fund lump sum investment and a systematic withdrawal plan (SWP) may make it happen.

Mutual fund lump sum investment for retirement planning

A mutual fund lump sum investment is suitable for an investor with a long-term investment horizon.

If one invests in an equity mutual fund, they may earn sizeable capital gains in the long term because of the power of compounding.

In the short term, market fluctuations may not deliver expected results, plus the impact of the power of compounding may also be realised more in the long term.

A lump sum investment may also be used for creating a retirement corpus.

However, for that, it is better if one invests early in their career to generate a large fund from a small investment amount.

SWP for retirement planning 

SWP is a method to withdraw a fixed amount periodically from a mutual fund investment.

An investor invests a lump sum amount in a hybrid or a debt mutual fund and asks the fund house to provide them with a monthly income.

The fund house sells net asset value (NAV) of the same amount to provide that income to the investor.

People often use this method to get a regular income from a mutual fund investment. 

What we will calculate

We will calculate in 2 phases. In the first phase, we will show how, at a 12 per cent annualised return, a mutual fund investor can generate an estimated corpus of Rs 5,99,19,814 in 30 years from a Rs 19,99,999 mutual fund one-time investment.

In the second phase, we will show how, after paying tax on capital gains and investing the remaining amount in another mutual fund scheme, one may withdraw an estimated monthly income of Rs 3,48,500 for 30 years through SWP.

In that way, if a person makes this investment at 25 years of age, they may generate an estimated corpus of Rs 5,69,23,822 by 55 years of age.

After paying long term capital gain tax (LTCG) and investing the remaining amount in a hybrid or debt fund, they may withdraw an estimated monthly income of Rs 3,48,500 till 85 years of age.

Retirement corpus in 30 years from Rs 19,99,999 investment

At a 12 per cent annualised return, estimated capital gains an investor can have in 30 years will be Rs 5,79,19,815, while the estimated retirement corpus generated will be Rs 5,99,19,814. 

Tax on Rs 5,99,19,814 retirement corpus

 The tax on this corpus will be long term capital gain tax (LTCG). As per existing tax rules, one gets an exemption of Rs 1,25,000 on LTCG. After that, the tax rate is 12.5 per cent.

After a Rs 1,250,000 exemption, the taxable capital gains will be Rs 5,77,94,815. At a 12.5 per cent rate, the estimated tax will be Rs 72,24,351.875, while the post-tax estimated corpus will be Rs 5,26,95,462.125. 

SWP investment for monthly income

Rs 5,26,95,462.125 will be the estimated amount to be invested in a mutual fund scheme and start an SWP.

We will invest it in a hybrid conservative or debt fund to get a 7 per cent annualised return

Monthly income from SWP corpus

The estimated monthly income that can be generated from this corpus for 30 years will be Rs 3,48,500.

Calculation summary

One-time investment- Rs 19,99,999
Investment period: 30 years
Expected annualised return- 12 per cent
After 30 years of investment 
Estimated capital gains- Rs 5,79,19,815
Estimated retirement corpus- Rs 5,99,19,814

Tax calculation

LTCG tax exemption- Rs 1,25,000
Taxable capital gains- Rs 5,79,19,815- Rs 1,25,000= Rs 5,77,94,815
LTCG tax rate- 12.5 per cent
Estimated tax (LTCG)- Rs 72,24,351.875
Post-tax corpus for SWP investment- Rs 5,99,19,814- Rs 72,24,351.875= Rs 5,26,95,462.125

SWP calculation for monthly income

Estimated monthly income for 30 years- Rs 3,48,500
Total withdrawn amount in 30 years- Rs 12,54,60,000
Balance- Rs 62,593

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)