Many working professionals often delay their retirement planning. Even after 8 to 10 years of working, a large number of people still do not have a clear plan for their future. But considering inflation and lifestyle costs, you may need at least ₹1 lakh per month during retirement to live comfortably. Fortunately, there is a simple investment route that can help, by starting with just ₹5 lakh.
This method involves investing a lump sum now, letting it grow over time, and then using a Systematic Withdrawal Plan (SWP) to get regular monthly income after retirement. Let’s understand how this works with simple numbers and steps.
Step 1: Invest ₹5 Lakh as a Lump Sum in Equity Mutual Funds
If you are 21 years away from retirement, you can use this time to grow your investment by choosing high-return mutual fund schemes. Many equity mutual fund schemes in India have delivered annual returns between 15% and 18% over long periods.
Let’s say you invest ₹5 lakh today in a fund that gives a 15% annual return for the next 21 years. Based on this growth rate, your investment can grow to around ₹94 lakh.
Lump Sum Investment Details:
- One-Time Investment: ₹5,00,000
- Investment Period: 21 years
- Expected Return: 15% annually
- Value After 21 Years: ₹94,00,000
Step 2: Use SWP to Earn ₹1 Lakh Per Month for 20 Years
Once your corpus reaches ₹94 lakh after 21 years, you can switch the fund to a low-risk debt mutual fund and start a Systematic Withdrawal Plan (SWP). Through SWP, the mutual fund house credits a fixed amount to your bank account every month while the remaining investment continues to earn returns.
If you start withdrawing ₹1 lakh per month for the next 20 years, and your money continues to earn 8% annual return, you will receive ₹1.45 crore in total. Even after 20 years of regular withdrawal, you’ll be left with a small balance in your account.
SWP Plan Details:
- Corpus at Start: ₹94,00,000
- Monthly Withdrawal: ₹1,00,000
- Duration: 20 years
- Annual Return Assumed: 8%
- Total Withdrawn: ₹1,45,00,000
- Balance Left After 20 Years: ₹747
- Total Return Gained: ₹51,00,747
This plan shows how a disciplined and long-term investment can help create a monthly income during retirement without depending on anyone.
What is a Systematic Withdrawal Plan (SWP)?
An SWP or Systematic Withdrawal Plan is a feature offered by mutual fund companies. It allows investors to withdraw a fixed amount regularly, usually monthly, from their investment. While the withdrawals happen, the remaining amount stays invested and continues to earn returns.
SWP works best for:
- Retired individuals looking for a fixed monthly income
- People taking a career break or sabbatical
- Anyone who needs a regular income but wants to keep their money invested
This method not only helps in generating a stable income but also keeps your remaining funds growing through compounding.
Disclaimer: This article is for informational purposes only. Past returns do not guarantee future results. Mutual fund investments are subject to market risks. Please consult a certified financial advisor before investing.
Sources: Franklin Templeton India, Economic Times
