Planning for retirement is essential to ensure financial stability during your non-working years. With the right investment strategy, you can build a substantial retirement corpus that provides a steady monthly income.

By making a one-time investment and using a Systematic Withdrawal Plan (SWP), you can create a long-term financial safety net. Read on to discover how an initial investment of ₹5 lakh can grow into a retirement fund that provides ₹87,000 per month for 30 years.

Understanding Retirement Corpus

A retirement corpus is a pool of money accumulated over time to cover expenses after retirement. It serves as a financial cushion, ensuring that you don’t have to depend on others for your needs.

How Much Retirement Corpus Do You Need?

The corpus should be sufficient to last throughout your retirement years. If you expect to live for 25-30 years post-retirement, your savings must be large enough to sustain your lifestyle, factoring in inflation.

Building a Retirement Corpus: Investment Strategy

There are multiple ways to grow your retirement savings, including:

✔ Lump Sum Investment: A one-time investment allows your money to grow over decades due to compound interest.
✔ Systematic Investment Plans (SIPs): Monthly investments provide disciplined savings and steady returns.
✔ Equity & Debt Mix: If you're young, you can invest more in equities for higher returns. As retirement nears, a balanced portfolio with debt funds ensures stability.

How a ₹5 Lakh Investment Grows Over Time

Let's break it down into two key phases:

1️⃣ Wealth Accumulation Phase (30 Years of Growth)
2️⃣ Withdrawal Phase (30 Years of Monthly Income)

Phase 1: Growing ₹5 Lakh into a ₹1.49 Crore Corpus

• Suppose a 25-year-old investor makes a ₹5 lakh one-time investment in a mutual fund with an average annual return of 12%.
• Over 30 years, their investment will grow through the power of compounding.
• Estimated retirement corpus at 55 years of age = ₹1,49,79,961.

Impact of Taxes on Retirement Corpus

• Under the current Long-Term Capital Gains (LTCG) tax rate of 12.5%, the tax liability on ₹1.49 crore will be approximately ₹17.94 lakh.
• After deducting taxes, the remaining retirement corpus will be around ₹1.31 crore.

Phase 2: Converting ₹1.31 Crore into ₹87,000 Monthly Income

To ensure stable income, the ₹1.31 crore corpus is reinvested in conservative mutual funds with an expected annual growth of 7%.

• The investor can withdraw ₹87,000 per month for the next 30 years through an SWP (Systematic Withdrawal Plan).
• Over 30 years, the total withdrawals will amount to ₹3.13 crore, with a remaining balance of approximately ₹2.64 lakh at the end.

How SWP (Systematic Withdrawal Plan) Works

✔ Lump Sum Investment: Invested in a mutual fund or other low-risk financial instruments.
✔ Fixed Monthly Withdrawals: Fund houses sell NAV units periodically to generate a stable payout.
✔ Continuous Growth: If the withdrawal rate is lower than the growth rate, your corpus can last for decades.

Final Thoughts: Why Start Retirement Planning Early?

✅ Compounding Benefits: The earlier you invest, the faster your money grows.
✅ Tax Advantages: Certain investments provide tax deductions under Section 80C.
✅ Stable Retirement Income: With the right strategy, you can secure financial freedom post-retirement.

Planning ahead ensures that you enjoy retirement without financial worries. Start early, invest wisely, and let your money work for you!

(Disclaimer: The above figures are estimates and not financial advice. Consult a professional before making investment decisions.)

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