₹1 Crore
Mutual Fund Corpus: How Much Can You Withdraw Through an SWP for 25 Years?
Anantharaman
S, Personal Finance Expert
If you have
a mutual fund corpus of ₹1 crore at retirement, instead of keeping the entire
amount in a bank account and spending it, you can invest it in mutual funds and
withdraw money every month as needed. This method is called an SWP (Systematic
Withdrawal Plan).
This
calculation considers three important factors:
·
Initial investment:
₹1 crore
·
Annual investment
return: 8%
·
Annual inflation: 5%
·
Withdrawal period: 25
years
Importantly,
if you withdraw the same amount every month without accounting for inflation,
the purchasing power of that money will decrease over time. Therefore, it is
more practical to increase your monthly withdrawal by 5% every year to account
for inflation.
How much
can you withdraw and spend?
According to
this calculation, you can withdraw approximately ₹47,700 per month in the first
year. After that, you can increase the withdrawal amount by 5% every year to
account for inflation.
Assuming a
constant annual return of 8%, the corpus will be almost exhausted by the end of
25 years.
Monthly SWP
in the first year
₹47,700
Initial
corpus
₹1 crore
Expected
annual return
8%
Annual
inflation
5%
Withdrawal
period
25 years
How much
can you withdraw each year?
|
Year |
Monthly withdrawal |
Annual withdrawal |
|
1 |
₹47,700 |
₹5.72 lakh |
|
5 |
₹57,900 |
₹6.95 lakh |
|
10 |
₹74,000 |
₹8.88 lakh |
|
15 |
₹94,400 |
₹11.33
lakh |
|
20 |
₹1,20,500 |
₹14.46
lakh |
|
25 |
₹1,54,000 |
₹18.48
lakh |
These are
approximate figures. The calculation assumes that the monthly withdrawal
increases by 5% every year. Income tax, investment expenses and market
fluctuations have not been included.
What
happens if you ignore inflation?
If you
withdraw a fixed amount of ₹75,300 every month without increasing it to account
for inflation, the same corpus may last for 25 years under the assumed 8%
annual return.
However,
after 25 years, the purchasing power of that fixed amount will be significantly
lower than its value today.
Important
considerations for retirement
When
planning monthly income during retirement, you should consider inflation,
market fluctuations and investment diversification.
·
Keep
money for the next one or two years of expenses in relatively low-volatility
investments.
·
Plan
long-term growth investments separately from investments intended to meet
short-term expenses.
·
Remember
that an annual return of 8% is not guaranteed.
·
If
the market falls early in retirement, withdrawing too much can increase the
risk of running out of money.
Key
takeaway
With a ₹1
crore corpus, ₹47,700 per month in the first year is a mathematical starting
estimate for funding 25 years of expenses while increasing withdrawals in line
with inflation.
It is not a
guaranteed income. In practice, you should also account for income tax, the
type of investment, market risk and an emergency reserve for unexpected medical
expenses when planning your retirement.
About the author..!
Anantharaman
S, Personal Finance Expert
Mr. Anantharaman S has been
reached at avs.anantharaman@gmail.com and
90037 45876
Mr.
Anantharaman S, Financial Professional with over 20+ years of experience in
Asset Management Company, Wealth Management, Retirement Planning, Investment
Advisory and Long-term Financial Solutions. Views are his personal.
Read articles written by Anantharaman
S, Personal
Finance Expert in
Nanayam Vikatan, Aval Vikatan and Vikatan.com a leading personal finance
magazine : https://bit.ly/4c2sbth
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme
related documents carefully. The past performance of the mutual funds is not
necessarily indicative of future performance of the schemes.
