SWP Calculator
Key Takeaway
A Systematic Withdrawal Plan (SWP) from a ₹1 crore equity fund at 8% annual withdrawal (₹66,667/month) can sustain regular income for 25+ years while the remaining corpus continues to grow.
Remaining Corpus Value Over Time
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Generating a Salary from Thin Air
A Systematic Withdrawal Plan (SWP) is the exact reverse of a SIP. Instead of putting money in every month, you withdraw a fixed amount every month from a mutual fund. It's the ultimate tool for retirees to create a self-sustaining 'salary' from their investments, provided the withdrawal rate is lower than the expected return rate.
Retiring with Dignity: Mr. Sharma's Golden Years
Instead, he invests the ₹1 Crore in a conservative hybrid mutual fund expecting a modest 9% annual return. He sets up an SWP of ₹60,000 per month (which is a 7.2% annual withdrawal rate).
- Year 1 Withdrawal: He takes out ₹7.2 Lakhs to fund his life.
- Year 1 Growth: His remaining ₹92.8 Lakhs grows by 9% (₹8.35 Lakhs).
- End of Year 1: Despite withdrawing ₹7.2 Lakhs, his corpus actually grew to **₹1.01 Crores!**
Because his withdrawal rate is lower than his growth rate, Mr. Sharma has created an infinite money glitch. He can draw a ₹60,000 monthly salary for the rest of his life, and his principal will likely never run out.
How to Create a Monthly Salary From Your Mutual Fund in Retirement
For most Indians, retirement planning has a clear accumulation phase (save, invest, grow) but a vague distribution phase (how exactly do I live off this money?). A Systematic Withdrawal Plan answers the distribution question with elegant simplicity.
An SWP allows you to withdraw a fixed monthly amount from your mutual fund corpus while the remaining units continue to grow. If your ₹2 crore corpus earns 10% annually and you withdraw ₹1.2 lakh/month (₹14.4 lakh/year), your corpus can sustain itself for over 30 years , because the remaining corpus keeps compounding.
The math breaks down when withdrawal rate exceeds net growth. If you withdraw 10% of your corpus annually and the fund earns 8%, your corpus depletes. This is why a 4% withdrawal rate (popularised by the FIRE movement's "4% Rule") has historically been sustainable , it's well below long-term equity return rates.
Tax efficiency is another advantage: equity fund SWP withdrawals have LTCG tax implications only on gains, not the principal portion of each withdrawal. Compare this to Fixed Deposits where the entire interest is taxed annually at slab rate. Over a 20-year retirement, this tax efficiency compounds meaningfully.
Frequently Asked Questions
What is SWP and who should use it?
Systematic Withdrawal Plan (SWP) lets you withdraw a fixed amount from your mutual fund investment at regular intervals. It's ideal for retirees who need monthly income from their corpus while keeping the rest invested.
Is SWP better than FD interest for retirement income?
For most retirees in the 30% bracket, SWP from equity funds held for 1+ year is more tax-efficient. LTCG up to ₹1.25 Lakh is tax-free, and only gains (not the withdrawal amount) are taxed. FD interest is fully taxable at slab rate.
How long will my corpus last with SWP?
It depends on the withdrawal rate vs. the fund's return rate. If you withdraw 4% annually and the fund returns 10%, your corpus can last 30+ years. If you withdraw 8% with 10% returns, it may last only 15-18 years.
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