Rs 16 Lakh Lump Sum: Can It Sustain Retirement Income Of Rs 30,000 Monthly?

Building a retirement corpus is a major financial goal for many individuals and families. This is important to ensure financial security in post-retirement years. To maintain a good quality of life in your golden years, it is important to have a steady source of income. One of the ways to generate a sizable retirement corpus is to start making investments from the present moment right until retirement.

Retirement planning requires a long-term strategy and investments in the right assets. Suppose you plan to build a retirement corpus with a lump sum investment of Rs 16 lakh currently. Would it yield a retirement corpus big enough to offer a monthly pension of Rs 30,000?

Let’s take a look at different investment scenarios to build a retirement corpus for a steady income of Rs 30,000 per month in post-employment years.

We are assuming that a starts the investments at the age of 25 and the investment compounds till 60.

Total investment: Rs 16 lakh

Tenure: 35 years

Expected rate of return: 12%

Estimated returns: Rs 8.29 crore

Maturity corpus: Rs 8.45 crore

Let’s assume that a person starts investing at 35 and here’s how the investment will grow till retirement age.

Lump Sum Investment In A Mutual Fund At The Age Of 35

Total investment: Rs 16 lakh

Tenure: 25 years

Expected rate of return: 12%

Estimated returns: Rs 2.56 crore

Maturity corpus: Rs 2.72 crore

It’s important to note that the returns described above are hypothetical in nature. Actual returns in mutual funds may vary due to market volatility and other factors.

As the above calculations show, while you can build a retirement corpus that practically offers you Rs 30,000 per month by investing Rs 16 lakh lump sum at the age of 25, you may receive lower monthly pensions when you start investing at the age of 35.

In the first scenario, a lump sum investment of Rs 16 lakh at the age of 25 can grow into Rs 8.45 crore at an assumed interest rate of 12% per annum by the time you reach the retirement age.  At an assumed interest rate of 6% per annum, the corpus can generate Rs 50.7 lakh per year, far beyond the requirement of Rs 3.6 lakh annually (Rs 30,000 per month) for your pension payouts.  

On the other hand, when you start investments at the age of 35, the total retirement corpus of Rs 2.72 crore may fetch Rs 16.32 lakh annually at an assumed interest rate of 6%. This amount will also could be helpful to meet your target of a monthly pension of Rs 30,000.

Diversification of investments across mutual funds, PPF and FDs may offer steady returns while minimising risks. Apart from mutual funds, you may also explore building a retirement through other long-term investment schemes like the Public Provident Fund (PPF), fixed deposits (FDs) and National Pension Scheme (NPS). While investments in PPF currently give an interest rate of 7.1% per annum, you can expect 6-8% returns from FDs. The interest rate from NPS could range from 9-12% per annum.

To go about building your retirement nest, you can diversify your portfolio and invest in different assets to achieve a substantial corpus.