What is SWP (Systematic Withdrawal Plan)?
SWP is the opposite of SIP. In SIP you invest a fixed amount every month; in SWP you withdraw a fixed amount every month from your existing mutual fund investment. The remaining money stays invested and keeps earning returns.
SWP is popular with retired people and anyone who wants a regular cash flow from their savings. It is also more tax efficient than a fixed deposit because only the gain portion of each withdrawal is taxed.
How does the SWP calculator work?
The calculator grows your investment at the expected rate and deducts a fixed withdrawal at the end of every month. The monthly rate is worked out from the yearly rate so that compounding stays consistent.
Final value = P × (1 + R)^n − W × [ ((1 + i)^(12n) − 1) / i ] i = (1 + R)^(1/12) − 1
- P = Total investment (the corpus you start with)
- W = Withdrawal per month
- R = Expected yearly return rate
- n = Time period in years
- Total withdrawal = W × 12 × n
Example: With ₹5,00,000 invested, withdrawing ₹10,000 per month for 5 years at 8% return, you withdraw ₹6,00,000 in total and about ₹5,218 remains at the end. If the final value is negative, the corpus finishes before the time period ends.
Benefits of SWP
- Regular monthly income without redeeming the full investment.
- Remaining money continues to grow with market returns.
- Better tax treatment compared to bank FD interest, especially for equity funds held over one year.
- You can change or stop the withdrawal amount at any time.
Tips for a safe SWP
- Keep the withdrawal rate below the expected return so the corpus does not finish early.
- Use hybrid or balanced funds for lower volatility.
- Review the plan every year and adjust for inflation.
Frequently asked questions
Is SWP good for retirement income?
Yes. SWP gives a fixed monthly cash flow while the rest of the corpus stays invested. It is one of the most common retirement income strategies in India.
How is SWP taxed?
Each withdrawal is treated as a redemption. Only the capital gain part of the withdrawal is taxed, not the full amount, which makes SWP tax efficient.
What happens if my corpus finishes before the time period?
The final value becomes negative, which means the withdrawals are more than what the corpus can support. Reduce the withdrawal amount, increase the corpus or expect a higher return to fix this.
Can I start SWP immediately after investing?
You can, but it is better to wait at least one year for equity funds to avoid exit load and short term capital gains tax.
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View allDisclaimer: This calculator is for information purposes only. Results are estimates based on the inputs you provide and do not guarantee any returns. Please consult a qualified financial advisor before making investment or tax decisions.