For retirees and wealth planners, Systematic Withdrawal Plans (SWPs) offer steady income from mutual funds. Instead of redeeming all units at once, SWPs allow investors to withdraw a fixed amount monthly or quarterly while the rest of the investment continues to grow.
How SWPs Work
- You invest a lump sum (say ₹20 lakh) in a mutual fund.
- You set a withdrawal amount (₹20,000 per month).
- The fund redeems units equivalent to that value each month.
- Remaining units continue to earn returns.
SWPs are popular among retirees, freelancers, and anyone seeking regular income.
Example — SWP on ₹20 Lakh Corpus
| Corpus | Withdrawal | Expected Return |
Sustainability |
|---|---|---|---|
| ₹20,00,000 | ₹20,000/month | 10% p.a. | Corpus lasts ~20 years |
| ₹20,00,000 | ₹25,000/month | 10% p.a. | Corpus lasts ~15 years |
Benefits of SWP
- Regular cash flow (monthly/quarterly).
- Tax efficient: Only capital gains taxed, not the whole withdrawal.
- Flexibility: Change withdrawal anytime.
- Longer wealth life compared to lump sum withdrawal.
Risks of SWP
- Market risk: Returns depend on fund performance.
- Withdrawal risk: If you withdraw too much, corpus depletes fast.
- Inflation risk: Fixed withdrawals lose value over time.
Who Should Use SWPs?
- Retirees looking for pension-like income.
- Investors with large corpus in equity/debt funds.
- Freelancers/business owners wanting steady cash flow.
Plan Your Withdrawals Smartly
Use an SWP Withdrawal Planner Tool to calculate safe withdrawal rates. Start your SWP with Groww or ET Money today.
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