Retirement Planning: Patience is important in retirement planning. If one has a long-term investment horizon, they can create a large corpus from a small investment if they begin their investment journey early.

In contrast, they start late; they need to invest a much larger amount to reach the same target.

Once a retirement corpus is attained, they may use it to withdraw a regular income for years.

One may use the combination of a one-time investment and a systematic withdrawal plan (SWP) to get a regular income.

If one invests Rs 4,00,000 one time and gives sufficient time for their corpus to grow, they may create a target, from where they may withdraw a monthly income of approximately Rs 70,000.

Know how it may be possible-

Why you may require retirement corpus

In the retirement phase, you may not have sufficient income sources for their daily expenses.

In such a situation, you can rely on their retirement corpus, from where you can draw passive income for years.

You may use it as an annuity amount, from where you can withdraw principal and interest every month.

How much retirement corpus you may require

Since inflation rises with time, the retirement corpus of an individual should not dry out throughout their retirement life. It means the retirement corpus should be large.

How to build large retirement corpus

For it, one needs to start their retirement planning early. Starting early will provide sufficient years for their retirement corpus to grow.

If they have a long-term investment horizon, they can create a large corpus from a small investment.

In contrast, a person who is starting late may require a much larger amount to attain the same retirement corpus target.

Or if they are quite late, they may not reach their retirement corpus goal at all since they need quite a high investment amount.

From Rs 4,00,000 one-time investment to Rs 70,000 monthly income

We will show this calculation in 2 phases.

In the first phase, we will show how a Rs 4,00,000 one-time investment can grow in 30 years and how one may withdraw approximately Rs 70,000 from it for 30 years.

So, if a person is 25 years old, they may let the amount grow by the time they reach 55 years of age.

If they withdraw the amount, pay tax, invest it in a mutual fund, and start SWP from it, they may withdraw an approximately Rs 70,000 monthly income for 30 years.

Corpus from Rs 4,00,000 investment

If one makes a Rs 4,00,000 investment and lets it grow for 30 years at a 12 per cent annualised rate, estimated capital gains will be Rs 1,15,83,969, and the estimated corpus will be Rs 1,19,83,969.

Tax on corpus

Since it’s a 30-year-long lump sum investment, only long term capital gain (LTCG) will apply.

One gets a Rs 1,25,000 exemption on LTCG.

After that, the tax rate is 12.50 per cent.

These rules are subject to change. But we are calculating as per the current tax rate. 

The estimated tax on the total corpus will be Rs 14,32,371.125, so the estimated post-tax corpus will be Rs 1,05,51,597.875. 

How to draw Rs 70,000 monthly income for 30 years

One may invest Rs 1,05,51,597.875 in a debt, hybrid, or a mix of both mutual fund(s) and initiate an SWP to get a monthly income.

The reason to invest in a debt or hybrid fund is that one should take a minimum risk with their post-retirement investments.

If the investor gets a 7 per cent return on their investment, they may withdraw Rs 69,750 monthly income for 30 years from it.

After withdrawing a total estimated amount of Rs 2,51,10,000 over 30 years, the estimated balance will be Rs 52,665.

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