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4% Withdrawal Rule: Monthly SIP of Mutual Funds You Need to Fulfill Post-Retirement Wishes

By on August 28, 2022 0

4% withdrawal rule: Fulfilling wishes after retirement depends a lot on a person’s financial planning. According to tax experts and investment experts, you should plan your retirement at the beginning of your career or, say, at least 30 years old. In this case, the investor will have 30 long years to invest. They said that long-term investing helps an investor start with the smallest monthly investment possible if they don’t have an initial amount for a one-time investment.

Investment objective to meet post-retirement wishes

Speaking on the minimum monthly expenses one would need after age 30, Jitendra Solanki, a SEBI-registered tax and investment expert, said: “Today, a lower-middle-class and middle-middle-class person needs at least 50,000 per month to meet his minimum basic needs after retirement. Bearing in mind an average inflation of 6%, this 50,000 per month would rise to approximately 2.90 lakh per month after 30 years. So, one should start investing with an investment objective that can help him get 2.90 lakh per month after retirement.”

4% withdrawal rule explained

On the amount of retirement funds one would need after retirement to meet his post-retirement wishes, Pankaj Mathpal, MD and CEO of Optima Money Managers said, “The 4% withdrawal rule to meet his needs after retirement, it would take approximately 6.75 crores after retirement. To limit the increase in inflation after retirement, it is advisable to keep this money in the SWP (Systematic Withdrawal Plan) by investing in hybrid conservative and balanced funds. These funds offer a return of around 7-8% per year, which will help the investor limit the annual increase in inflation after retirement. He said that the hybrid fund conservative SBI, the equity and debt prudential fund ICICI and the hybrid debt fund Kotak hybrid fund options that can be considered for SWP, if the person recently retired and plans to invest the retirement fund in SWP.

Mutual fund calculator

On how to accumulate 6.75 crore over the next 30 years, Kartik Jhaveri, Director – Wealth at Transcend Capital, said: “Equity mutual funds are the best option as they offer a return of around 15% from a downside perspective. He said that the 15 x 15 x 15 rule of mutual funds suggests that if a person invests in mutual funds in SIP mode for 15 years, he would get about 15% return on his money As the investment is over 30 years, one can expect to get around 15% However, my suggestion is to use an annual increase of 15% to keep the monthly SIP as low as possible and increase the monthly amount of SIP with the increase in his annual income.

Assuming a 15% annual return on money 30 years from now using a 15% annual increase, the SIP Calculator suggests starting with a monthly SIP of around 30,000. This will allow the investor to accumulate 6.75 crores in 30 years.

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Photo: Courtesy piggy mutual funds SIP calculator

We should therefore start with 30,000 monthly SIPs to meet post-retirement wishes Investment target of 6.75 crores in mind.

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