Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Real life example for equity in retirement

Posted by Muthu on September 20, 2015

After I wrote today’s piece, I thought I should have given an example of how this concept of withdrawal from equity would have worked in a real life scenario.

There are SIP calculators everywhere. SWP calculators are limited in numbers and not functional in many places. I found a working SWP calculator in Sundaram mutual fund’s website (http://www.sundarammutual.com/returncalc/returncalc.htm).

I assumed that someone invested Rs.1 crore in Sundaram Select Midcap 10 years ago and has withdrawn Rs.1 lakh every month. So the withdrawal rate works out to fixed 12% per annum. For ease of illustration, I’ve assumed withdrawal every single month in the last 10 years; even when markets fell by 50% in 2008 crisis.

So the total amount withdrawn during the last 10 years is Rs.1.2 crores; more than the initial corpus of Rs.1 crores.

Do you know what is the value of the investment today after withdrawing Rs.1.2 crores?

Rs.3.2 crores

The initial capital has multiplied by 3.2 times even after withdrawing 12% per annum and also going through the biggest financial crisis after great depression.

Had the same been invested in debt fund, the withdrawal would have been only around 8%. The investor would have withdrawn Rs.80 lakhs over last 10 years and would be left with the same Rs.1 crore.

Considering that for debt funds, withdrawals are taxable and for equity funds withdrawals are tax free from 2’nd year onwards; makes it even a better proposition.

What we explained in the previous piece is a good way to manage your wealth and income during retirement.

This example further validates what we said.

2 Responses to “Real life example for equity in retirement”

  1. Jay said

    In the hindsighit it is very easy and to predict future it is very tough

  2. Venkat said

    Jai Ho Muthu,

    Your articles with examples actually provide true insights to any investor.

    Return of 18% may be on the higher side, but if someone stays through the course for more than 15 / 20 years, as you have been stating in some of your articles, I think it should be achievable. Forget it, even a 15% CAGR would be huge enough.

    Thanks for your valuable advice.

    Regards
    Venkat

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