Rs 1 crore in mutual funds? Here's how much can you withdraw every month without running out of money

A crore of rupees sounds like a comfortable retirement fund. And it certainly is a good amount to have. But experts are of the view that if someone is retiring at 60 and this money has to take care of your expenses until you’re 85 or 90, the calculation becomes a little more complicated.

“The first thing I would tell someone with a Rs 1 crore mutual fund portfolio is not to look at monthly withdrawals in isolation. Rs 40,000 or Rs 50,000 a month may look manageable today, but what happens 15 or 20 years later?” said Charu Pahuja CFP, Director & COO, Wise FinServ.

With a Systematic Withdrawal Plan (SWP), you can withdraw a fixed amount every month. For instance, Rs 40,000 works out to Rs 4.8 lakh annually, or 4.8 per cent of the original portfolio. At Rs 50,000 a month, the annual withdrawal rises to 6 per cent.

“There is one important distinction here. Unlike interest earned on a bank deposit, an SWP involves selling mutual fund units. So your monthly withdrawal can come from investment gains as well as your own capital,” Pahuja added

How much could Rs 1 crore leave you with after 25 years?

Let’s look at three return assumptions: 6 per cent, 8 per cent and 10 per cent annualised. It must be noted that these are illustrations, not return promises. 

Look at the Rs 50,000 example. At an assumed 8 per cent annualised return, you could withdraw Rs 1.5 crore over 25 years and still have about Rs 2.3 crore left.

That looks encouraging. But there’s a catch. Nobody earns exactly 8 per cent every year, and markets don’t deliver identical returns every month. A few bad years soon after retirement can change the outcome quite significantly.

What if your monthly expenses keep rising?

This is where retirement calculations often become unrealistic. Your grocery bill, medical expenses, travel and household costs are unlikely to remain unchanged for 25 years. At 6 per cent inflation, something that costs Rs 40,000 today could cost nearly Rs 72,000 in 10 years.

Let’s consider a more practical situation where you increase your SWP by 5 per cent each year.

The difference is striking. At 8 per cent CAGR, a fixed Rs 50,000 withdrawal leaves a substantial corpus. Increase the same withdrawal by 5 per cent every year, and the money runs out during the 24th year.

That is why I believe retirement planning needs to begin with expenses, not expected investment returns.

So, how should the money be invested?

If someone depends on this Rs 1 crore for monthly expenses, he or she should be careful about putting the entire amount into equity funds. Markets can go through difficult phases, and one wouldn’t want to sell your equity investments at a loss just to meet regular expenses.

“I would prefer keeping enough money in liquid or short-duration debt funds to cover the next couple of years of expenses. The remaining amount can be spread across equity savings, balanced advantage and diversified equity funds, depending on how much risk the investor is comfortable taking,” Pahuja said. 

Taxation also needs attention. Each SWP instalment is a redemption, and taxable capital gain depends on the fund type, holding period, and applicable tax rules. The entire withdrawal is not automatically taxable.

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