Monthly income from mutual fund lump sum investment, one-time investment: A small amount of investment can give surprising results in the long term. It may create a retirement corpus that can generate passive income for one’s life. It can grow to a corpus where one can withdraw a monthly amount for decades. It can help one achieve many financial goals along with the retirement corpus goal. The condition is to let the investment grow for a long time. By doing so, one may create a retirement corpus that can help them withdraw a monthly income for decades. A Rs 3,30,000 one-time investment in a mutual fund scheme may generate an estimated monthly income of Rs 58,000 for 30 years. Know how! 

Benefit of long-term investment

When your investment horizon is long, the investment can grow by more than 100 times.

Let’s take the example of a person who invests Rs 50,000 on their 20th birthday for their retirement.

They want to redeem this investment at 60 years of age and expect a 12 per cent annualised return. 

In 40 years, estimated capital gains will be Rs 46,02,549, and the estimated corpus will be Rs 46,52,549.

Now let’s assume the investor gets a 12.50 per cent annualised return on the same investment.

In 40 years, estimated capital gains will be Rs 55,09,950, and the estimated corpus will be Rs 55,59,950.

Use of SWP in retirement planning

In SWP, you invest a lump sum amount in a mutual fund and tell the fund house to provide you a fixed monthly income.

The fund sells NAVs of the same amount every month and deposit it to your account.

The benefit of the whole exercise is that even if the market is fluctuating highly or the interest rates are going through quick changes, you are withdrawing only a small portion of your corpus, and your rest amount will recover once the market bounces back or interest rates fall. 

Calculations for story 

In our story, we will show the retirement corpus created from a Rs 3,30,000 investment in 30 years at a 12 per cent annualised return.

In the next phase of the calculation, we will show an estimated monthly income one may withdraw from the post-tax corpus at 7 per cent annual growth.

So, if a person is 25 years old, they may let the corpus grow till 55 years of age and may withdraw an estimated monthly amount of Rs 58,000 till the age of 85.

Retirement corpus from Rs 3,30,000 in 30 years 

In 30 years, estimated capital gains from a one-time investment will be Rs 95,56,774 and the estimated corpus will be Rs 98,86,774.

Income tax on retirement corpus

Long Term Capital Gain (LTCG) tax will apply to this corpus.

The investor will get a tax exemption of Rs 1,25,000 on this corpus.

After that, the tax rate will be 12.5 per cent. 

The estimated tax liability on the corpus will be Rs 11,78,971.75, and the post-tax estimated corpus will be Rs 87,07,802.25.

SWP corpus

Rs 87,07,802.25 will be the SWP investment amount. We expect a 7 per cent annualised return on this investment. 

Monthly income for 30 years from SWP corpus

At a 7 per cent annualised return, one may withdraw an estimated monthly income of Rs 57,595 for 30 years.

After withdrawing that amount, the estimated remaining amount will be Rs 2,750.

The total estimated withdrawn amount in 30 years will be Rs 2,07,34,200.

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