Get a Guaranteed Income of Rs 2 Lakh Every Month

With the interest rates in the economy at very low levels, it has become difficult to build your retirement planning using debt instruments like Fixed Deposits, Public Provident Fund (PPF), Post Office RDs, or EPFs.

Due to the low interest rates, these products will not help very well in retirement planning. Nor can they beat rising inflation.

Given that retail inflation is now above 6%, you will not be able to beat inflation with these options.

You will be able to do this only if your annual return on investment is more than 10%, and such returns are possible only when you invest in equity or equity oriented products.

Here we will tell you how to plan with equity products, so that you will be able to get Rs 2 lakh every month after retirement.

There is a Risk

However, it is a fact that equity-oriented products, such as equity mutual funds, are riskier than debt-instruments.

But investment experts say that if you stay invested in such instruments for a long time (more than 10 years), then the risk or volatility comes down significantly and you can earn 10-12% annual returns, which will cover inflation. can defeat.

How Much Money Will Be Needed Every Month for 20 Years

At present, a retired couple needs around Rs 50,000 per month to live comfortably after retirement, provided they have their own house.

But assuming an annual inflation rate of 5 percent, after 20 years, this amount will increase to Rs 1.65 lakh. Also, this amount will increase every year after your retirement.

Now the question arises: how much should be invested now to generate this much income after retirement?

Understand the Importance of Planning

If you are 40 years old and plan to retire at the age of 60, you have 20 years to accumulate capital that will provide you with post-retirement income.

For this, you have to go to equity mutual funds. Assuming that your investment in equity mutual funds will generate an average return of 12%, you will need to invest Rs 40,434 in equity mutual fund schemes every month through SIPs till the age of 60 to get a monthly income of Rs 1.65 lakh after retirement.

4 Crore After 20 Years

With a 12% return, your monthly SIP investment will grow to Rs 4 crore after 20 years.Out of this, withdraw half, Rs 2 crore, and invest that amount in liquid funds or short term debt mutual funds; then, withdraw Rs 1.65 lakh every month through the Systematic Withdrawal Plan (SWP).

In this case, Rs 2 crore will last for approximately 10 years (9 years and 8 months). Here it is assumed that you will withdraw 5% more every year and that your investment in liquid funds will generate a 4% annual return.

Last Important Calculation

After 10 years, the remaining Rs 2 crore invested in equity mutual funds would have grown to Rs 6.52 crore, and by that time (when you turn 70), your monthly expenses would have increased to Rs 2.70 lakh.

Take this Rs 6.52 crore and repeat the procedure from ten years ago. So after 15 years (by the time you turn 85), the amount lying in your liquid fund would have come down to Rs 2.33 crore.

This amount can provide you with income for the next five years of your retired life. If you follow this process, you’ll be able to beat inflation, even assuming a life expectancy of 90 years.