Monthly Income from One-time Investment: Investment made for a long term can help you get surprising results. It can convert your small investment into a giant corpus; it can help you achieve many of your financial goals, and it may enable you to get a monthly income for 30 years after making a one-time investment.
All may be possible if you have the patience to see your investment grow.
One may use the combination of a mutual fund lump sum investment and systematic withdrawal plan (SWP).
In this write-up, we will tell you how you may get an estimated Rs 2,74,500 per month income for 30 years after making a one-time investment of Rs 15,75,000.
Mutual fund investment for retirement corpus
One may use a mutual fund investment to create a retirement corpus.
They may opt for a lump sum or systematic investment plan (SIP) method to achieve this important financial goal.
If they start their investment journey early in their professional career and give sufficient time for their investment to grow, they can create a corpus multiple times their investment.
See two examples of creating a retirement corpus from a lump sum and SIP investment.
Rs 7,50,000 lump sum investment for retirement corpus building
If one invests a Rs 7.5 lakh lump sum in a mutual fund scheme and gets a 12 per cent annualised return from it, in 30 years, they can create an estimated corpus of Rs 2,24,69,942.
Rs 15,000 monthly SIP investment for retirement corpus building
Similarly, if one starts a Rs 15,000 monthly SIP investment and lets it grow for 30 years, from where they get an annualised return of 12 per cent, they can create an estimated Rs 4,62,14,598 corpus on Rs 54,00,000 overall investment.
Calculations for story
Our calculation will be in 2 phases.
In the first phase, we will show how a Rs 15,75,000 one-time investment can generate an estimated corpus worth Rs 4,71,86,877 at a 12 per cent annualised return in 30 years from their mutual fund lump sum investment.
In the second phase, we will show how, by investing the same amount in a mutual fund and starting an SWP, how one may withdraw an estimated monthly income of Rs 2,74,500 for 30 years.
So, if an investor makes a lump sum investment at 25 years of age, they can generate an estimated corpus of Rs 4,71,86,877 by 55 years of age.
After paying tax from the same corpus, they may withdraw an estimated monthly income of Rs 2,74,500 till 85 years of age.
Retirement corpus from Rs 15,75,000 one-time investment
In 30 years, estimated capital gains will be Rs 4,56,11,877, while the estimated corpus will be Rs 4,71,86,877.
Income tax on Rs 4,71,86,877 corpus
The tax on this corpus will be long term capital gain tax (LTCG). As per the current rules, one gets an exemption of Rs 1,25,000 on LTCG.
After that, the tax rate is 12.5 per cent.
As per the LTCG tax rule, after a Rs 1,250,000 exemption, the taxable capital gains will be Rs 4,54,86,877.
At a 12.5 per cent annualised rate, the estimated tax will be Rs 56,85,859.625, while the post-tax estimated corpus will be Rs 4,15,01,017.375.
SWP investment
Rs 4,15,01,017.375 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 and expect 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 over Rs 2,74,500.
Calculation summary
One-time investment- Rs 15,75,000
Investment period: 30 years
Expected annualised return- 12 per cent
After 30 years of investment
Estimated capital gains- Rs 4,56,11,877
Estimated retirement corpus- Rs 4,71,86,877
Tax calculation
LTCG tax exemption- Rs 1,25,000
Taxable capital gains- Rs 4,56,11,877- Rs 1,25,000= Rs 4,54,86,877
LTCG tax rate- 12.5 per cent
Estimated tax (LTCG)- Rs 56,85,859.625
Post-tax corpus for SWP investment- Rs 4,71,86,877- Rs 56,85,859.625= Rs 4,15,01,017.375
SWP calculation for monthly income
Estimated monthly income for 30 years- Rs 2,74,500
Total withdrawn amount in 30 years- Rs 9,88,20,000
Balance- Rs 7,385
