Withdraw Tax-efficient Happiness Post Retirement

Withdraw Tax-efficient Happiness Post Retirement

Everyone has to retire one day. Some people retire at an early age or some retire at their death bed. Let’s directly switch on a product which will give not only income after retirement but also will help tax planning.

Systematic Withdrawal Plan is a facility for regular cash flow with the help of mutual funds. It gives the investor, the freedom to enjoy life one has always dreamt of post retirement. One can withdraw funds from existing mutual fund outlays at pre-set interludes, be it fortnightly, monthly, quarterly or even annually, which will create a regular cash flow for both certain and uncertain needs. One can plan investments and withdrawals with tax advantage. It gives an investor more potential to gain rewards over a span of time, as one withdraws happiness bit by bit.

A Systematic Withdrawal Plan is a divesture strategy that empowers one to redeem fund units in a planned mannerism, instead of a lump sum sale. Constructively, one can withdraw investments in parts, thereby spawning a rhythmic stream of inflows.

An SWP is the antipodal of a Systematic Investment Plan, wherein one invests in mutual funds in parts. Moving funds from savings to a better performing mutual fund scheme is a SIP, while in an SWP, the movement of funds is back into savings account from already made investments. Alike, investing in mutual funds is easy on the VSRK app, withdrawals are also simple and straightforward on the app.

To execute an SWP, one need to withdraw some part of your investment at periodic intervals. Withdrawal money from investment means selling off or redeeming a chunk of the units one holds. The number of units to be sold depends on the NAV on the date one makes the withdrawal.

The period to start SWPs from one’s own funds need to be conceived well in advance to get the complete benefits. It is advisable not to go for SWP in two conditions, first is when one has cash at hand or when markets begins its downtrend. During such times, one should put money to work to achieve preset goals of wealth creation.

Retirement, the phase of life when incoming paychecks halts, is considered as a favorable time to start an SWP. 

SWP acts as a rewards of the systematic investments made during working years. People generally ask a very complicated question that for how long the SWP will last? Ultimately the length of SWP is determined by two main factors. The first is the size of the corpus and the withdrawal amount is the second one. Principally, the progressive the frequency and amount pulled out, the swifter will be the rate of abatement of the corpus.

The uptrend performance of the markets are directly proportionate to milking higher amounts through SWP. Contrarily, if markets are showing downtrend, the radius of SWP may dwindle. Making systematic withdrawals using an SWP allows you to take advantage of rupee cost averaging. 

Tax implications of SWP

When any investor makes withdrawals via SWP, it allures taxes based on type of scheme. The tax incidence on SWP depends on FIFO method and the holding period.

SWP initiated from an equity fund in the 1st year of investment, it is coined as STCG. The amount will be taxed at the rate of 15%. Whereas, if initiated after 1 year of investment, it falls under LTCG. Long term capital gains are completely tax-free. We at VSRK always suggests to do an SWP from your equity fund investments upon completion of one year.

Risk averse investors investing in Debt funds shall note that the holding period for debt funds taxation is 3 years. Any SWP initiated from the debt fund within 3 years of investment, it is considered as STCG and when initiated after 3 years of investment, it falls under LTCG which are taxed at 20%. Additionally, you can get the benefit of inflation indexation.

Concluding the words, SWPs can heavily aid in unifying income needs post retirement. In order to achieve the most of blessings, VSRK helps to plan SWP according to your requirements and tax incidence.

Retire Early and Travel Forever

Retire Early and Travel Forever

Have you ever imagined about enjoying a life travelling the world? The solo thought amazes us! What if you retire young and spend the rest of your life travelling the world? We know it sounds a little crazy, but several people have already done this. Most people retire early to travel the world full time and enjoy the life of their dreams. The reality is that we live in a time where it is not that easy to live as you like. Travelling is easier said than done. It is not affordable each time you plan a trip. However, many people have made it possible and taught us how to make travelling affordable. Reading books about the type of life you want to enjoy is always a great source of motivation. They not just only motivate you but implementing the steps will help you to create a new road map to living your dream life.

Early retirement-an easy cup of tea
Early retirement does not come easy, but it has never been easier to make it happen. Few takeaway steps will surely help you to consider a new way of life. It is suggestible to invest around 50% of your income in such a way so that you can get timely growth on your investment. It is up to you to decide how you want to live your life. If travelling is your passion, then saving is the best opportunity. Savings should be a part of your behavior and not just a sacrifice for your dreams. It will make it easier for you to live your life as a traveler.

Krysty and Bryce-best example
Many people shared their views regarding retiring early and travelling forever but, in our opinion, the best of all is the experience shared by Kristy Shen and Bryce Leung. They both have written a book named- quit like a millionaire. One of the best books we have ever read. It is full of real deals and original strategies on how to travel the world forever. They quit their engineering jobs in their early 30’s to travel the world. Their book is all about simple rules, optimizing your investment efficiently, and to build a 7-figure portfolio. Their FIRE story has featured in the New York Times, CNBC, and UK independent.

Early retirement-never a regret.
If you think retiring early and being rich can only be possible when you have inherited property or won a lottery, there is another example that will change your mind. The Bangalore based couple laid a job as It engineers and retired in their early 20’s. They never regretted their decision & they consider it as a crucial step towards their success. During the time of their retirement, they were earning five figures. Adopting FIRE philosophy-financial independence & retiring early, has given immense popularity among the working people in history and will be beneficial in the future as well.

Adopting FIRE approach
FIRE approach aims to maximize your savings rate. Focus on your spending rather than on earning. Most people have a common misbelief that early retirement is possible for the people with high paying salaries rather it’s difficult for people with a spendy lifestyle one should be very controllable regarding his/her spending habits. The approach is simple- don’t make your cost of living unnecessarily high. While travelling this will help you to an extent- when you will move from country to country, you will be comfortable. It’s never been easy to travel with less money. Learn more about travel rewards, use credit card rewards. Travel smart, not expensive.

Saving strategies
Getting older and potentially starting a family may change your travel lifestyle in the future. You have to preplan your guide map that will lead to a completely balanced lifestyle- family, money, and travelling. Exploring the world never comes with a simple step of having money, but it’s all about strategies you plan with your money. Saving, investing, and spending is the key interlinked with each other. You have to balance them to unlock the door of your dream life.
Live life like an adventure, explore the world as a traveler!

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