How Can I Invest My Retirement Corpus and Withdraw Monthly While Still Growing It?

Ans: Hello, ideally the SWP amount should be 5% annually of the total corpus. In order to receive 75K per month, the corpus should be 1.8cr. Since you have a corpus of 2crs, you can easily withdraw 75K per month and also increase the SWP 3% annually.
The funds can be diversified into mid caps, small caps, equity hybrid, multi cap, large and mid cap and consumption fund.
Please note that these suggestions are based on your stated goals and the information you provided. It is always a good idea to consult with a financial advisor in person to better understand your time horizon and fund selection.

Ans: 2 crores

Ans: Hello;

It would be advisable to invest your corpus lumpsum in hybrid conservative (debt oriented) fund type.

I recommend Kotak hybrid debt fund or SBI conservative hybrid fund both from the same category as mentioned above, suggested based on 5 year returns.

I recommend that you let the corpus compound for 2 years minimum.

Your corpus may grow to 1.17 Cr after 2 years assuming modest return of 8%.

Here if you do a 5% SWP then you may expect a monthly payout of 48750 per month for next 25 years.

At the end of 25 years you can expect a net corpus value of around 3.58 Cr(modest return of 8% considered) after deducting monthly payouts.

Other option for you could be to buy immediate annuity from an insurance company. Considering annuity rate of 6% you may expect to receive monthly payment of 50K from the next month onwards. It has various features for joint holding and return of purchase price after the end of annuity period(25 years for eg) or expiry of the annuity holder, to the nominee.

Do your due diligence and choose the best option suiting to your requirement.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing

Happy Investing!!

Ans: Investing a retirement corpus wisely is crucial. The challenge here is twofold: ensuring monthly withdrawals through a Systematic Withdrawal Plan (SWP) while also allowing the remaining corpus to grow over time.

In your case:

Corpus: Rs 1 crore
Monthly Withdrawal: Rs 80,000
Investment Period: 15 years
Target Amount After 15 Years: Rs 3 crore
The key goal is to balance regular income, capital preservation, and growth. Let’s explore how this can be achieved efficiently.

Step 1: Allocation Strategy for Your Corpus
To maintain withdrawals and grow your corpus, a diversified portfolio is recommended. This can be achieved through a combination of debt and equity instruments.

Consider the following allocation:

40% in Debt Mutual Funds: This provides stability and generates consistent returns. Debt funds are less volatile than equity funds, making them ideal for the withdrawal component.

60% in Actively Managed Equity Mutual Funds: These funds offer growth potential, allowing your corpus to appreciate over time. Equity investments will help counter inflation, especially given your goal of increasing your corpus to Rs 3 crore over 15 years.

Step 2: Implementing a Systematic Withdrawal Plan (SWP)
An SWP is a powerful tool that allows you to withdraw a fixed amount monthly from your investment. Here’s how it can work:

Initial Monthly Withdrawal: Rs 80,000 from your debt mutual fund allocation. This ensures your withdrawal needs are met while the equity portion continues to grow.

Annual Increase in Withdrawals: To account for inflation, consider increasing your monthly withdrawal by 5% each year. This adjustment will help maintain your purchasing power over time.

Step 3: Protecting Your Principal and Ensuring Growth
A common concern with SWPs is depleting your principal over time. However, with the right approach, you can sustain withdrawals and still grow your corpus. Here’s how:

Rebalance Annually: Review your portfolio at least once a year. If equity markets perform well, you can shift some gains to debt funds. This ensures you lock in profits while maintaining stability.

Choose Growth Option in Mutual Funds: By choosing the growth option instead of the dividend option, your investments continue to compound, even as you withdraw regularly.

Avoid Direct Funds: Instead of opting for direct plans, investing through a Certified Financial Planner with MFD credentials is more effective. They can offer guidance on fund selection, asset allocation, and tax efficiency.

Step 4: Addressing the Tax Implications
Given the new tax rules, here’s what you need to consider:

Equity Mutual Funds: Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%, while short-term capital gains (STCG) are taxed at 20%.

Debt Mutual Funds: Both LTCG and STCG are taxed according to your income tax slab.

To optimize taxes, you can withdraw primarily from debt funds in the initial years and switch to equity funds later as they become long-term investments. This approach minimizes your tax liability.

Step 5: Creating an Emergency Reserve
Even with a robust plan, unexpected situations can arise. Therefore:

Keep 6 months’ worth of withdrawals (around Rs 4.8 lakh) in a liquid mutual fund or short-term debt fund. This ensures you have quick access to funds without disturbing your main portfolio.

Consider health insurance and other emergency coverage to protect against unforeseen expenses.

Step 6: Addressing Inflation and Future Growth
Inflation erodes purchasing power, especially over long periods. Since your target is Rs 3 crore after 15 years, it’s crucial to adjust for inflation:

Historically, equity investments have beaten inflation over the long term. By keeping a 60% allocation in equity, your portfolio is positioned to grow and potentially outpace inflation.

To further safeguard your financial goal, consider investing a portion in balanced advantage funds or hybrid funds. These dynamically adjust between equity and debt based on market conditions, ensuring optimal returns with lower risk.

Step 7: Monitoring and Reviewing Your Plan
A retirement portfolio needs regular monitoring to ensure it stays on track:

Conduct a portfolio review every 6 months. This helps you assess performance, rebalance if necessary, and adjust your SWP amount in line with inflation.

Stay in touch with your Certified Financial Planner for personalized advice and strategy updates. This will help you stay aligned with your long-term goals.

Finally
Achieving a balance between monthly withdrawals, capital growth, and inflation protection is definitely possible. With the right strategy and regular monitoring, your corpus can continue to support you comfortably.

Focus on:

Diversifying across debt and equity.
Using SWP for consistent income.
Rebalancing periodically.
Staying updated on tax implications.
Building an emergency reserve.
These strategies, if followed diligently, can help you achieve your retirement goal of Rs 3 crore while meeting monthly withdrawals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment