Can your ₹4.5 crore corpus generate ₹4 lakh a month? Decoding the retirement math

A ₹4.5 crore retirement corpus invested in a fixed deposit (FD) at a 7% interest rate earns about ₹37.33 lakh in interest over a year. However, it also pushes income into the 30% tax slab, attracting around ₹7 lakh in taxes under the new tax regime, leaving the retiree with roughly ₹30.33 lakh a year.

But there is a way to get better post-tax returns that also increase each year to keep up with inflation — mutual funds.

According to an Economic Times (ET) report, investing the corpus in a mutual fund and setting up a systematic withdrawal plan (SWP) reduces the tax burden and creates a steady income.

Another plus of this approach is that you can withdraw both the principal and the gains, but you pay income tax only on the gains, not on the principal.

The report noted that long-term capital gains on equities are also exempt up to ₹1.25 lakh in a given year, and gains above it are taxed at a much lower rate of 12.5%.

The higher your investment in equity instruments with a long-term horizon, the lower your tax outgo, ET said. Therefore, tax liability for equity MFs remains much lower compared to FDs if you are investing ₹4.5 crore.

What is the tax-efficient way to invest ₹4.5 crore?

If you hold a ₹4.5 crore corpus and possess the risk appetite for growth assets like equities, setting up a Systematic Withdrawal Plan (SWP) through mutual funds is a highly effective way to generate regular monthly income.

However, rather than parking your entire wealth into a single fund, strategic diversification is critical. A more prudent, risk-adjusted approach involves dividing your corpus across five distinct investment buckets:

While wealth management strategies can vary based on individual financial goals, below is one structured allocation blueprint for effectively distributing a ₹4.5 crore portfolio:

Decoding the ‘Bucket Strategy’ for regular income

The proposed asset allocation relies on a strategic “bucket” approach, carefully structured to minimise risk while maximising tax efficiency across both short- and long-term horizons.

This method segments your investments into distinct time-based buckets, each designed to generate regular income for specific years. By retaining a substantial portion in equities, the strategy targets significant capital growth over time.

However, financial experts have cautioned that this approach is exclusively suited for investors with a strong risk appetite for equity market volatility.

Here is how the bucket allocation breaks down across different time horizons: