What is SWP? (Systematic Withdrawal Plan)
A Systematic Withdrawal Plan allows you to withdraw a fixed amount from your mutual fund investment at regular intervals — monthly, quarterly, or annually. It is the opposite of a SIP, and is commonly used by retirees to generate a steady income stream from their accumulated corpus.
For example, a ₹50 lakh corpus earning 10% annual returns can sustain a monthly withdrawal of ₹40,000 for over 30 years.
How SWP Works
Each month: Corpus earns interest, then withdrawal is deducted.
Remaining Corpus = (Previous Corpus × (1 + r)) − Monthly Withdrawal
Where:
r = Monthly Rate of Return (Annual Rate ÷ 12 ÷ 100)
Benefits of SWP
- Regular Income: Provides a predictable, inflation-adjusted income stream in retirement.
- Tax Efficiency: Only the gains portion of each withdrawal is taxed, not the full amount.
- Capital Preservation: If withdrawal rate is below returns rate, your corpus keeps growing.
- Flexibility: You can adjust or stop withdrawals anytime.
SWP Planning Tips
- Keep your withdrawal rate below your expected return rate to avoid depleting the corpus too quickly.
- Invest the corpus in a balanced or conservative hybrid fund before starting SWP.
- Maintain 6–12 months of expenses as a liquid emergency fund outside the SWP corpus.
- Review the withdrawal amount annually against inflation.
