Are You Wanting an Income-Generating Retirement: Do You Desire an Engaging Post Retirement Life? In order to live our retirement lives the way we desire, having a retirement corpus or source of income that supports us can make the journey smoother and happier. If we strive for an eventful life, preparations should begin early. One solution could be building up an ample retirement corpus to cover our post-retirement expenses. One should start their investment journey as early as possible to take full advantage of compound interest’s power and grow their investments efficiently. Even starting small amounts early can create large-amount corpuses. Systematic Withdrawal Plan (SWP) may generate a substantial monthly income stream. When combined with one-time investments of Rs 6,75,000 and systematic withdrawal plans in phases, one may draw monthly income of approximately Rs 1.18k over 30 years from their corpus through SWP withdrawal plans. Discover more.
What is retirement planning?
Retirement planning entails creating a corpus or source(s) of income to provide income during retirement. Ideally, this income should increase annually with inflation ensuring an economically secure retirement phase.
Why should you have access to income/asset sources?
India is not known for having many financially independent retirees; most depend on others for expenses and will live an economically stressful existence once retired. A retirement corpus/income source can help reduce this dependency; having funds set aside could allow a financially stress-free existence for people.
How Can I Determine Size of Retirement Portfolio
Based on your current lifestyle and needs, it’s possible to calculate a retirement corpus. Your age, retirement age and life expectancy are three crucial components that contribute to this calculation. With inflation factored into account, you can estimate first year expenses related to retirement; taking that figure as payment in year one allows you to calculate overall retirement needs which must account for inflation and post-retirement returns.
Example of Retirement Corpus
Let’s consider some factors and determine the estimated retirement corpus for someone in their 30s:
Current age = 30 Retirement age = 60 Life expectancy = 80 Monthly expenditures of Rs 40K Pre-retirement return = 12unicipiului Post-retirement return of 69%
inflation = 6%
For such an individual, estimated spending for their first year of retirement will total Rs 2,29,740 while estimated corpus requirements would amount to Rs 5.51,37,600.
Investment for retirement planning.
One can make periodic investments like monthly systematic investment plans (SIPs) or one-off (lump sum) investments, with market-linked and non-linked schemes depending on risk appetite and years until retirement.
Investment portfolio for retirement corpus.
Let us examine how much is required in terms of SIP investments and one-time contributions in order to build up an adequate retirement corpus, using this example as our starting point. An individual investing in monthly SIP payments would need approximately Rs 15,620 while investing one time would require approximately Rs 18,40,379.
Calculating an estimate retirement corpus requires discounting its estimated need with pre-retirement investment growth rates and then dividing by 12. To determine an SIP payment amount, one can take the nominal rate and divide by 12 for SIP calculations.
Life Expectancy
Knowing your expected lifespan is also crucial, since without it it would be impossible to calculate a retirement corpus. In order to do this, take into consideration family medical history, your current health status, and lifestyle habits when making this calculation.
Retirement corpus inflation
Since inflation is non-stationary and fluctuates frequently, we can use long-term inflation data (for instance 20 years of data) as an estimate of current inflation rates.
Calculations for Story
Our calculation process entails two parts. First, we will estimate a corpus after investing one time for 30 years; and secondly, how one may withdraw an estimated monthly amount of almost Rs 17,7000 as post-tax return from post-tax return investments starting from 25 years of age up until 85 years of age. So if an investor begins their one-time investment at 25 years of age they could withdraw it all at 55 years and thereafter withdraw monthly amounts until 85 years.
Retirement corpus from one-time investment of Rs 6.75,000
Calculation Method Using 12 Percent Annualized Growth for 30 years.
Capital gains estimated will reach Rs 1,95,47,947 while retirement corpus would amount to approximately Rs 2,02,22,947
What will the tax implications for my retirement corpus be?
Since all this return will comprise long term capital gains (LTCG), an investor will receive an exemption of Rs 1,25,000 on his corpus, making his estimated taxable income Rs 1,94,22947; with 12.50 per cent tax due on these gains making up his estimated total tax bill to Rs 2427868.375 before retirement savings reach 1,77950778625.
An investment in SWP for retirement.
Start Your Saved With Pension (SWP) Now
Estimated monthly retirement corpus withdrawal income.
One could potentially receive an estimated monthly income of Rs 1,17,700 over 30 years with this investment.
Total withdrawal amount in 30 years
Estimates suggest that over 30 years, an estimated total withdrawal amount will amount to Rs 4.23,72,000 while its estimated balance worth post withdrawal could amount to Rs 5,512.
