Hi Sir, Good morning. Hi I am 43 years old. I am regular investor in SIP. I invest 2lacs per month in SIP. My fund value will be approximately 6.5 cr in 5 years. If I would like to retire at after 5 years and need approximately 3 lacs per month as SWP for 25 years.. Can you please let me know how many years i can sustain with 6.5 cr.? or how much 6.5cr will grow if i dont withdraw lumpsum but only SWP of 3 lacs per month for 25 years.? Thank you.

Ans: Investing Rs.7500 monthly with the goal of securing a lifelong pension of Rs.20,000 requires careful planning. Using SIP with SWP (Systematic Withdrawal Plan) can be a strategy, but longevity risk (outliving your savings) is a concern. To aim for a sustainable pension, consider a mix of growth-oriented and income-generating investments. However, achieving a consistent Rs.20,000 monthly payout from a Rs.7500 SIP in 12 years might be challenging. A more realistic approach might involve increasing your investment amount or extending the investment horizon.

Ans: It's commendable that you have taken proactive steps towards securing your financial future. Given your current situation, let's outline a plan to achieve a sustainable monthly income of 50,000 rupees through a Systematic Withdrawal Plan (SWP).

Assessing Current Financial Status
You have a well-balanced portfolio:

Mutual Funds (MF): 35 lakh rupees
Fixed Deposit (FD): 5 lakh rupees
Term Policy: 80 lakh rupees
Joint Health Insurance: 10 lakh rupees
No Loans
Take Home Salary: 1.5 lakh rupees
Monthly Expenditure: 50,000 rupees
Understanding SWP (Systematic Withdrawal Plan)
An SWP allows you to withdraw a fixed amount from your mutual fund investments regularly. To generate 50,000 rupees per month, you need to consider the longevity of your investments and expected returns.

Required Fund for SWP
To calculate the corpus needed, we assume a conservative annual return of 8% from your investments and a withdrawal period of 30 years.

So, the rough estimate works out to Rs 75 Lacs.

Building the Corpus
You currently have:

Mutual Funds: 35 lakh rupees
Fixed Deposit: 5 lakh rupees
Total current savings: 40 lakh rupees

You need to bridge the gap between 40 lakh rupees and 75 lakh rupees, which is 35 lakh rupees.

Increasing SIP Contributions
Given you are 59 years old, aiming to accumulate this amount before retirement requires increasing your SIP contributions significantly. Let's assume you plan to retire in 5 years.

Calculating SIP Requirement
To bridge the gap of 35 lakh rupees in 5 years, assuming an average annual return of 12% from your mutual fund SIPs.

Making It Feasible
Since 43,000 rupees might be a high SIP amount, consider the following adjustments:

Increase SIP gradually: Start with a feasible amount and increase it annually.
Consider lump-sum investments: Any bonuses or extra income can be added to your mutual funds to boost the corpus.
Conclusion
To achieve a 50,000 rupee monthly SWP, you need to accumulate approximately 75 lakh rupees. Start with a higher SIP contribution around 43,000 rupees, adjusting based on feasibility, and consider lump-sum investments. Regular reviews with a Certified Financial Planner will ensure you stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Evaluating Your Retirement Plan
Let's evaluate your plan to ensure financial stability during your retirement.

Current Investments
SIP Investment: Rs. 2 lakhs per month
Expected Fund Value in 5 Years: Rs. 6.5 crores
Retirement Plan
Monthly SWP Needed: Rs. 3 lakhs
Retirement Duration: 25 years
Sustaining Rs. 6.5 Crores with SWP
Assuming an average annual return of 7% on your investments post-retirement, let's calculate how long your corpus will sustain with a monthly SWP of Rs. 3 lakhs.

Calculating SWP Sustainability
Starting Corpus: Rs. 6.5 crores
Monthly Withdrawal: Rs. 3 lakhs
Annual Return: 7%
Using these parameters, we can estimate the duration your corpus will last.

Growth of Rs. 6.5 Crores with SWP
Corpus at Start: Rs. 6.5 crores
Annual Withdrawal: Rs. 36 lakhs (Rs. 3 lakhs x 12 months)
Annual Return on Remaining Corpus: 7%
The remaining corpus will continue to earn returns even as you withdraw funds. Let's see how it grows.

Insights and Recommendations
Sustainability: With a 7% return, your corpus can sustain for approximately 25 years with the monthly SWP of Rs. 3 lakhs.
Growth: The corpus will not only sustain but also grow, depending on the actual rate of return.
Detailed Calculation
Starting Corpus: Rs. 6.5 crores
Annual Return: 7%
Monthly Withdrawal: Rs. 3 lakhs
Yearly Breakdown (First Few Years)
Year 1: Starting Corpus = Rs. 6.5 crores

Annual Return = Rs. 6.5 crores * 7% = Rs. 45.5 lakhs
Withdrawal = Rs. 36 lakhs
End Corpus = Rs. 6.5 crores + Rs. 45.5 lakhs - Rs. 36 lakhs = Rs. 6.595 crores
Year 2: Starting Corpus = Rs. 6.595 crores

Annual Return = Rs. 6.595 crores * 7% = Rs. 46.165 lakhs
Withdrawal = Rs. 36 lakhs
End Corpus = Rs. 6.595 crores + Rs. 46.165 lakhs - Rs. 36 lakhs = Rs. 6.69115 crores
This pattern continues, showing how the corpus grows despite withdrawals, assuming a stable return.

Final Insights
Sustainable Plan: Your current plan is sustainable if the investments yield around 7% annually.
Monitoring: Regularly review and adjust your investments to maintain the desired returns.
Diversification: Ensure your investments are well-diversified to manage risks.
This plan should provide you with financial stability during retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You've set out a comprehensive plan for your financial future, aiming to invest Rs 2 lakhs per month until you reach 60, followed by withdrawing Rs 8 lakhs per month post-retirement via an SWP (Systematic Withdrawal Plan). You're also projecting an annual return of 12% and estimating a corpus of Rs 150 crores by the age of 77. Let's take a close look at whether this plan is feasible and practical over the long term.

Appreciating Your Commitment and Financial Discipline

Firstly, your decision to work until 60 and invest Rs 2 lakhs monthly for the next 17 years is commendable. This kind of discipline and foresight is rare. You're also considering a systematic approach to withdrawing funds post-retirement, which reflects sound financial planning. Now, let's evaluate some key aspects to ensure your expectations are aligned with practical outcomes.

Evaluating Long-Term Projections: Reality vs Assumptions

It’s important to address the assumption of earning a consistent 12% annual return over 17 years. While equity markets have delivered such returns in the past, they are not guaranteed, especially over such a long period. The market's ups and downs could lower or even boost the returns, depending on how your investments are distributed among asset classes.

Historically, equity mutual funds have performed well over long periods, often giving returns between 10% and 15%. However, assuming a consistent 12% return for 17 years without any hiccups is optimistic.

Market fluctuations could reduce returns, especially if a recession or downturn hits close to your withdrawal phase. You need to stress-test your projections by considering both optimistic and conservative scenarios.

It's important to invest in a diversified portfolio, including large-cap, mid-cap, small-cap, and debt funds, to mitigate risks over a longer horizon.

Are Investment Calculators Reliable?

Investment calculators are useful tools for giving a ballpark figure, but they come with limitations. They often make simplified assumptions, such as constant returns and no market volatility.

Investment calculators don’t account for real-world market variability, inflation rates, or shifts in economic policy.

They also don’t include the impact of tax on withdrawals post-retirement, especially with SWP, where taxation could reduce your actual monthly income.

Instead of relying solely on calculators, it's better to consult with a Certified Financial Planner for projections that consider inflation, taxes, and changes in the market environment.

Reviewing SWP Plans and Their Practicality

Switching to an SWP at 60 and withdrawing Rs 8 lakhs monthly for 17 years sounds ambitious. An SWP can be a good strategy, but several factors need to be considered:

Market Volatility: During the withdrawal phase, market downturns can impact the corpus, leading to a faster depletion than expected. This is especially true in the initial years of retirement, known as sequence-of-return risk.

Inflation: While Rs 8 lakhs a month might sound adequate today, the impact of inflation over 17 years could significantly erode your purchasing power. It’s important to consider the inflation-adjusted value of your withdrawals.

Tax Implications: Withdrawals from SWP schemes are taxed based on capital gains. Over 17 years, these tax liabilities could accumulate, reducing your monthly income. Keep this in mind when planning your SWP amounts.

Managing Expectations: Rs 150 Crores Corpus

Accumulating Rs 150 crores by the age of 77 might be an over-optimistic projection. Although consistent investments over time can indeed generate substantial wealth, there are a few challenges to this goal:

Compounding Returns: While compounding is powerful, market volatility and inflation can curb its potential. A 12% annual return might not be consistently achievable for 34 years (17 years of investing + 17 years of withdrawing).

Post-Retirement Income: Rs 8 lakhs per month during retirement translates to Rs 96 lakhs annually. Over 17 years, this withdrawal would amount to Rs 16.32 crores. If your corpus doesn’t grow as expected, or if returns fall short of 12%, there could be a risk of the corpus depleting too quickly.

Realistic Projections: You may want to factor in more conservative return rates, such as 8% to 10%, to get a more practical estimate of your final corpus. Even with these conservative rates, you should still be able to accumulate a significant sum to support a comfortable retirement.

Active Fund Management vs Passive Investments

Since your plan involves long-term investments, it’s essential to evaluate the type of funds you're using. Actively managed funds typically offer the opportunity for higher returns than passive investments like index funds.

Disadvantages of Index Funds: Index funds, while low-cost, merely track the market, making them more suitable for short to medium-term goals. Over long periods, their returns could be lower than actively managed funds, which have the flexibility to adjust to market conditions.

Advantages of Actively Managed Funds: With actively managed funds, professional fund managers can shift your investments based on market dynamics, which is important for a long-term investor like yourself. This could help achieve your expected returns of 12% annually or close to it, especially if combined with a balanced asset allocation strategy.

The Importance of Regular Monitoring and Adjustments

Your goal of investing Rs 2 lakhs per month until 60 and then withdrawing Rs 8 lakhs per month sounds like a well-thought-out strategy. However, it's critical to review your plan regularly, especially as you near retirement. Regular monitoring and adjustments can help you stay on track.

Annual Reviews: Review your portfolio performance annually with your Certified Financial Planner. This will help ensure that you're still on track for your desired corpus and that your funds are performing as expected.

Adjusting for Life Changes: Consider any life changes such as health issues, job changes, or family commitments. These could impact your ability to save or the amount you need post-retirement.

Rebalancing: As you approach 60, you should gradually reduce your exposure to equity and shift towards debt funds to secure your corpus. This will minimize the risk of a significant loss just before retirement.

Final Insights

Your current plan to invest Rs 2 lakhs per month until 60 and switch to an SWP is well-structured but requires some fine-tuning.

Be cautious about assuming a consistent 12% return over 17 years. While it’s achievable in some market conditions, it’s better to plan with more conservative estimates.

Investment calculators can give a rough idea, but they often don’t account for inflation, market volatility, and taxes, which could significantly alter your final corpus.

An SWP can work, but you must consider the risks of market downturns, inflation, and taxation during the withdrawal phase. It’s wise to build a conservative withdrawal strategy.

Avoid relying too much on index funds or ETFs for long-term wealth accumulation. Actively managed funds will give you more flexibility to adjust to market conditions, offering potentially higher returns.

Finally, regular reviews and portfolio rebalancing will be crucial as you approach retirement. This ensures your strategy remains aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in