Suppose you have a corpus of ₹50 lakh and want to withdraw ₹30,000 every month to cover household expenses, retirement needs or travel. How long will your money last?
A Systematic Withdrawal Plan SWP calculator can help estimate how long your corpus may last based on your monthly withdrawals and the expected rate of return. You can also adjust these figures to see how different withdrawal amounts and market returns may affect your savings. However, actual results may vary depending on market performance, taxes and inflation, so it is important to test different scenarios before planning your withdrawals.
How Long Could ₹50 lakh Last?
Suppose you have a corpus of ₹50 lakh and want to withdraw ₹30,000 every month through a Systematic Withdrawal Plan (SWP). Your money remains invested in a mutual fund while you make regular withdrawals. The time your corpus lasts will depend on how the investment performs and how much you withdraw.
If your investment earns returns, those gains may help offset some of your withdrawals. However, if the returns are low or the market falls, your corpus may decline faster.
An SWP calculator can help estimate how long your ₹50 lakh may last under different return assumptions.
Stress-Testing Your SWP
The actual lifespan of your corpus could differ based on your investment’s performance and the withdrawal patterns. To test the ₹30,000 monthly withdrawal from a ₹50 lakh corpus on a calculator, consider the following scenarios:
Scenario 1: No investment growth
If your corpus does not experience any growth, regular withdrawals would gradually deplete the initial amount. With an annual withdrawal of ₹3.6 lakh, your corpus could be exhausted within 13 years and 11 months.
Scenario 2: Positive performance
If your invested amount is growing during the withdrawal period, some of that growth could offset the withdrawals. However, the extent of this effect could depend on the growth rate, the timing and the amount withdrawn.
Scenario 3: Market declines during early withdrawals
If the market falls after you start withdrawing ₹30,000 every month, you may have to sell more mutual fund units to get the same amount. Even if the market recovers, you now have fewer units left. Hence, the corpus may deplete quickly.
Factors Influencing How Long Your Money Lasts
- Inflation: The cost of living usually rises over time. This means ₹30,000 a month that covers your expenses today may not be enough to meet the same needs in the future.
- Investment assumption: You can use a mutual fund return calculator to estimate how your investment may grow at different rates of return. Remember that these are estimates based on assumed returns, not guarantees of future performance.
- Taxes and charges: Taxes and applicable scheme-related fees can reduce the amount you receive from your SWP. Consider these costs when estimating how long your money may last.
- Withdrawal flexibility: If market conditions are unfavourable, reducing your monthly withdrawals may help your corpus last longer. However, this may not be possible if you need the money for essential expenses.
Conclusion
A ₹50 lakh corpus with monthly withdrawals of ₹30,000 may last about 13 years if your remaining corpus does not grow. If the remaining corpus continues to grow, it may last longer, based on the condition of the market, when you withdraw, and your expenses.
An SWP calculator can help you test different scenarios. Comparing different scenarios and factoring in inflation, taxes and your monthly expenses can help you estimate how long your money may last.