What is SWP?
SWP or Systematic Withdrawal Plan is a strategy that allows investors to withdraw a fixed amount of money at regular intervals (usually monthly) from their existing investment corpus. It's commonly used for retirement income or planned payouts.
How SWP Works
In an SWP, the withdrawal consists of both interest earned and a part of your capital. As time progresses, your balance reduces if the interest does not fully cover the withdrawals.
- You start with a lump sum investment.
- Each month, a fixed amount is withdrawn.
- Interest earned is added monthly based on the remaining balance.
- The process continues until the investment is exhausted or the planned duration ends.
Benefits of SWP
- Provides steady cash flow
- Helps manage retirement or passive income
- More tax-efficient than interest income in some cases
- Protects capital better than lump sum withdrawals
- Flexibility to change withdrawal amount or frequency
How to Use the SWP Calculator
Enter your initial investment, expected annual return, monthly withdrawal amount, and number of years you plan to withdraw. The calculator will show how long your funds last, how much you can withdraw, and the remaining balance each month.
Frequently Asked Questions (FAQs)
Is SWP safe for retirement income?
Yes, SWP is commonly used by retirees for predictable monthly income. It's safer than one-time withdrawal strategies and preserves capital longer.
What happens if the market performs poorly?
If returns are lower than expected, your capital may deplete faster. It's important to review your plan annually and adjust the withdrawal rate if needed.
Can I change the SWP amount midway?
Yes, most investment platforms allow you to increase or decrease your SWP amount or stop it altogether without penalty.
Is there tax on SWP withdrawals?
Yes, SWP withdrawals from mutual funds may be subject to capital gains tax depending on the holding period and fund type. Consult a tax advisor for clarity.