The Right Retirement Plan : Earn Rs 25,000 Per Month For 25 Years : Comprehensive Guide
Retirement Plan : Have you ever wondered how to generate a steady monthly income from your retirement savings? Many financial experts suggest keeping your savings in fixed deposits during retirement. However, this strategy comes with significant drawbacks. Fixed deposits typically offer a return of 7-8%, which is relatively low. Moreover, interest rates on fixed deposits are likely to decrease significantly over a 10-15 year period, leaving retirees with diminishing returns.
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The Post Office’s Senior Citizen Savings Scheme (SCSS) is another popular option, currently offering an interest rate of 8.2%. While this is a comparatively high return, there are limitations. For instance, you cannot invest more than Rs 30 lakh in the scheme. Additionally, the interest rate is not guaranteed to remain the same after the initial five-year term.
Annuity plans are also recommended by some as they provide a fixed interest rate for life. However, these plans typically offer a return of just 6-7%. While they are safe, the returns may not be sufficient to meet long-term financial needs, especially in a high-inflation environment.
If you prioritize safety in investments, you might end up with low monthly returns.
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So, how can retirees secure sustainable and higher returns without taking on excessive risk? The answer lies in a systematic withdrawal plan (SWP).
What is a Systematic Withdrawal Plan (SWP)?
A systematic withdrawal plan is a method of managing your retirement income by strategically withdrawing from your investments to meet your monthly income needs. With an SWP, you can adjust your investments to balance returns, risk, and income requirements. It is a flexible way to generate a steady monthly income by investing in diverse asset classes like debt, equity, and gold. However, it is essential to note that SWPs are subject to market fluctuations, which can affect returns.
How to Earn Rs 25,000 Per Month for 25 Years with an SWP
A systematic withdrawal plan in mutual funds can help you earn a monthly income of Rs 25,000 for 25 years. By investing in multi-asset mutual funds, you can achieve this target at different interest rates based on your initial investment. Here’s how it works:
- At a 6% Return:
- To earn Rs 25,000 per month, an investment of Rs 70 lakh is required.
- Over 25 years, you will receive Rs 73.54 lakh at the end of the term.
- At an 8% Return:
- An initial investment of Rs 51 lakh will suffice.
- By the end of 25 years, you will have Rs 51.77 lakh remaining.
- At a 10% Return:
- An investment of Rs 41 lakh will be needed.
- At the end of the term, you will have Rs 49.62 lakh.
- At a 12% Return:
- With an investment of Rs 34 lakh, you can achieve the same goal.
- The remaining amount at the end of 25 years will be Rs 49.39 lakh.
Benefits of a Systematic Withdrawal Plan
- Flexibility: SWPs allow you to customize your withdrawal amounts and frequency based on your needs.
- Diversification: By investing in multi-asset funds, you can spread your investments across debt, equity, and gold, balancing risk and return.
- Inflation Hedge: Unlike fixed deposits or annuity plans, SWPs in mutual funds have the potential to offer higher returns, helping you stay ahead of inflation.
- Residual Corpus: Even after 25 years of withdrawals, your investments can continue to generate wealth, as seen in the examples above.
Retirement Plan – Conclusion
Planning for retirement requires careful consideration of your income needs, risk appetite, and long-term financial goals. While traditional options like fixed deposits, SCSS, and annuity plans offer safety, their returns might not suffice in the long run.
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A systematic withdrawal plan in mutual funds provides a viable alternative, offering the potential for higher returns, flexibility, and a residual corpus at the end of the term. By investing strategically in an SWP, retirees can ensure a steady income of Rs 25,000 per month for 25 years, securing financial independence and peace of mind during their golden years.
Disclaimer:
The information provided in this article is for educational and informational purposes only. Investments in mutual funds are subject to market risks, and returns are not guaranteed. Readers are advised to consult a certified financial advisor before making any investment decisions. Past performance is not indicative of future results. The examples mentioned are hypothetical and are used for illustrative purposes only.
