How much do you need to invest to generate Rs 2 lakh monthly income after 20 years? Updated Jul 20, 2021 | 07:49 IST At present, an average retired couple needs around Rs 50,000 per month to have a comfortable post-retired life provided they have their own house. Representational image Key Highlights - If current retirement expenses are Rs 50,000 per month the it will increase to Rs 1.65 lakh after 20 years at 5% inflation. - Using both SIP and SWP one can generate the required income post retirement and beat inflation - If you stay invested in equity mutual funds for a longer period, you can expect an annual return of 12%
New Delhi: With interest rate in the economy falling to all-time low, it has become difficult to plan your retirement using debt instruments like fixed deposit, Public Provident Fund (PPF), Post Office RD or EPF as these products won't be able to help you beat inflation. Given the fact that retail inflation has increased to 6% level now, you won't be able to beat inflation if your investments don't generate over 10% annual return. This kind of return is possible only if you invest in equity or equity-oriented products. Although it is a fact that equity-oriented products such as equity mutual funds are riskier than debt-instruments, investment experts say if you stay invested in such instruments for longer term (more than 10 years) risk or volatility reduces significantly and you will be able to generate inflation-beating return of 10-12%. At present, an average retired couple needs around Rs 50,000 per month to have a comfortable post-retired life provided they have their own house. But this amount will increase to Rs 1.65 lakh after 20 years assuming an annual inflation rate of 5%. Also, this amount will rise every year after your retirement. Now the question that arises is how much should one invest now to generate this income post retirement? Use both SIP and SWP to achieve your goal If your current age is 40 years and you are planning to retire at 60 then you have 20 years to generate a capital that can give you this income. So one can easily go for equity mutual funds. Assuming that your investments in equity mutual funds will generate an average return of 12% you need to invest Rs 40,434 every month in equity mutual fund schemes through SIP till the age of 60 years to get a monthly income of Rs 1.65 lakh after retirement. How? At 12%, your monthly SIP investment will grow to Rs 4 crore after 20 years. Withdraw half of this, Rs 2 crore, and park that amount either in a liquid fund or in a short-term debt mutual fund and withdraw Rs 1.65 lakh every month through systematic withdrawal plan (SWP). In this case, the Rs 2 crore will last for around 10 years (9 years and 8 months) assuming that you withdraw 5% more every year and your investment in the liquid fund generates 4% annual return. After 10 years, the remaining Rs 2 crore investment in the equity mutual fund would have grown to Rs 6.52 crore and your monthly expenses would have risen to Rs 2.70 lakh by that time (when you turn 70 years). Now, withdraw this Rs 6.52 crore and follow the same procedure done 10 years before. In this case, after 15 years (by the time you would have turned 85), the amount lying in your liquid funds would have fallen to Rs 2.33 crore. This amount can give you income for another five years of retired life. If you follow this procedure, you will be able to beat inflation even if you assume a life expectancy of 90 years. -- You received this message because you are subscribed to the Google Groups "Thatha_Patty" group. To unsubscribe from this group and stop receiving emails from it, send an email to thatha_patty+unsubscr...@googlegroups.com. To view this discussion on the web visit https://groups.google.com/d/msgid/thatha_patty/1434719423.1095055.1626877489643%40mail.yahoo.com.
