Invest 40 Lakhs for Monthly Income

With Rs. 40 lakhs to invest, you have a lot of options to create a monthly income source. An important thing to consider here is if this is the only savings you have or if this is in addition to an existing income. The former is likely to be the scenario for those about to hit retirement or already have. Let’s see how you can benefit in either situation with the 40 lakhs that you have accumulated.

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7.7 Crore

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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

Investment Options to Invest 40 Lakhs for Monthly Income

There are two scenarios - one where the investor has already retired with a lifetime savings of Rs. 40 lakhs, and the other where the investor is planning his retirement. In either case, the investor will have dependents to worry about who survive on his/her income.

This creates the need for a regular income in the investor’s absence or to compensate for the loss of his/her income after retirement. Investing your 40 Lakhs in pension plans, immediate and deferred annuity plans, and retirement ULIPs can serve these concerns.

Even if you are far from your retirement age, it helps to have a backup in place in case things do not go as planned. There are several monthly schemes that offer guaranteed income along with insurance protection for the investor.

Another factor to consider here is inflation. Parking all your money in a savings account will offer next to no help in the long term. This is where market-linked investments come into play. These offer high returns based on market performance. However, such plans come with some risk as the investor stands to lose money if the market underperforms. Examples of market-linked investments are mutual funds, and ULIPs, among others.

Ideally, the investor should split the 40 lakhs into a mix of high-risk and low-risk investment instruments. A goal-based approach helps to plan better. Identify what your needs are, your current expenses and income, and extrapolate them to the rate of inflation. This will tell you how aggressive you need to be with your investment portfolio to create a decent monthly income with Rs. 40 lakhs.

Let’s look at these options in more detail.

Immediate & Deferred Annuity Plans

These are pension plans that come with guaranteed income benefits after you retire. You have the flexibility to choose your own retirement age and when you would want the income to start flowing in. Some plans also come with a spouse protection benefit if you were to die within the coverage period.

An immediate annuity is where you invest your 40 Lakhs in the plan, and income starts coming in as soon as the investment period is over. If it is a lump sum payment, you should start receiving the benefits immediately from the subsequent month. As an example, an investment of Rs. 40 lakhs in June 2022 will get you a monthly income of around Rs. 25,000 starting from July 2022 till your death.

A deferred annuity plan is a pension scheme where you invest your money and start receiving a monthly income after a certain period of time. An investment of 40 lakhs will get you a monthly pension of around Rs. 30,000 starting after 10 years from the date of investment and continuing for life.
Lump Sum

Investing the whole of 40 lakhs in lumpsum is risky but can be rewarding if the market performs well. The investor can reduce the risk profile by investing in a hybrid fund that comprises of equity and debt components. However, investors should remain invested for at least 5-10 years to generate good returns. The accumulated sum can be used to create a monthly income.

Let’s consider an example. Say that you invest a lump sum of 40 lakhs in a balanced fund for a period of 10 years. Assuming an 8% rate of return every year, you stand to gain around Rs. 46 Lakhs, taking your total fund value to Rs. 86 Lakhs.

Please note that these calculations are based on the past performance of funds and are only meant to offer an idea of the returns one can expect.
Unit-Linked Insurance Plans

ULIPs, which invest in market-linked funds as well, have the added benefit of insurance protection. If you put Rs. 40 lakhs into a ULIP for monthly income, half of it will go toward a life insurance policy and the other will be invested in market-linked products. Following your untimely death, life insurance provides financial support to your dependents. The investment component will help you get the most out of your money.

At the end of the investment period, the proceeds from ULIPs can be paid out in monthly installments. This establishes a reliable source of income that can assist you in meeting your financial obligations.
Guaranteed Monthly Income Schemes

These are traditional savings plans that offer a death benefit on your death and a maturity benefit at the end of the policy term. Throughout the entire period, the policy earns bonuses or loyalty additions that are added to the benefits. The policyholder can choose to receive the accumulated sum in a lump sum or as monthly income. An investment of 40 lakhs in monthly income schemes can earn you an income for up to 30-40 years.
Fixed Deposits

These require you to commit a lump sum amount for a period of up to 10 years. FDs earn an interest in the range of 5% to 6% annually. It is higher in the case of senior citizens. The accumulated interest along with the investment amount of 40 lakhs can be withdrawn by you on a monthly basis. You can also reinvest the total corpus in an immediate annuity plan to create an income for life.

To illustrate the returns better, let’s consider a sample case. You invest a lump sum of 40 lakhs in your FD account for a tenure of 10 years. Assuming an interest rate of 5.5% every year, you stand to gain a total interest of Rs. 29.2 Lakhs. This brings your total corpus to Rs. 69.2 lakhs.

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-01-2025

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).