Planning for retirement income is not something you do when you are old – it is something you do so that getting old feels less uncertain. And if you have ever felt the pinch of rising prices, you already know the quiet villain in this story: inflation. It silently chips away at your money’s value, making what seems like a comfortable sum today feel alarmingly inadequate tomorrow.
So, if you have just turned, congratulations – not just for hitting a new milestone, but for even thinking about your future at an earlier stage of life. That puts you ahead of most.
Let’s say you started working at 21, and over the past four years, you have managed to save up Rs 10 lakhs through a mix of fixed deposits, loyalty bonuses, and regular savings. That’s a fantastic start.
Now, let’s assume your goal is to retire at 55 – giving you 30 years to build a monthly income stream that can support the life you dream of. The question is: how do you go from this Rs 10 lakh base to creating a reliable monthly income when your working years are over?
Let’s explore how you can gradually build that cushion of financial freedom, brick by brick.
Now, let us consider you decide to invest that Rs 10 lakh lump sum for the next 30 years. With an assumed average annual return of 12 per cent – achievable through investing in equity mutual funds, or in case you have the skills, your own portfolio of stocks – your one time lump sum investment of Rs 10 lakh can grow nearly to Rs 3 crore (Rs 2,99,59,922).
The estimated corpus would be around Rs 2,99,59,922, where:
Invested Amount: Rs 10,00,000
Estimated Returns: Rs 2,89,59,992
This is where things start to get exciting.
At retirement, this nest egg can now be used to generate a steady monthly income using a Systematic Withdrawal Plan (SWP) Think of SWP as your personal pension system – one that allows you to withdraw a fixed amount at regular intervals, while remaining corpus continues to earn returns.
Let’s say you would like to receive Rs 2.5 lakh every month for the next 15 years, aligning with a life expectancy of around 70 years (a little above the Indian average of 68 years as of 2022).
Here’s how it can work:
Total Corpus at 55: Rs 2.99 crore
SWP Duration: 15 years (180 months)
Expected Returns in SWP (Liquid Fund): 7 per cent annually
Monthly withdrawal: Rs 2.5 lakh
Total Withdrawal over 15 years: Rs 4.5 crore
Corpus Left at the End: Rs 28.02 lakh
Total Interest Earned: Rs 1.88 crore
That’s the power of starting early.
And, that’s also the power of investing in the stock markets and letting your money compound without interruption. The big caveat being you pick your equity funds, and the stocks for your portfolio, wisely.
Now of course you need to keep in mind that the cost of living too would increase over the coming decades. So the value of the Rs 2.5 lacs per month would be a lot lower than it is today. But then this is a great start anyway you look at it.
By simply planting the seed of Rs 10 lakh today and letting it grow patiently for three decades, you create a financial tree that not only gives you generous shade in your retirement years but still leaves behind a sturdy trunk.
Think of it as a first step to a rich retirement.
Disclaimer: The article is for informational purposes only and not investment advice.
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