SWP Calculation Results
| Year | Start Balance (₹) | Annual Withdrawal (₹) | Interest Earned (₹) | End Balance (₹) |
|---|
What is a Systematic Withdrawal Plan (SWP)?
A Systematic Withdrawal Plan (SWP) is a smart way to withdraw money from your investments at regular intervals (monthly, quarterly, or yearly). It is the opposite of a SIP (Systematic Investment Plan), where you invest regularly.
With SWP, you can:
✅ Get a steady income from your investments (like a salary).
✅ Control withdrawals based on your needs.
✅ Stay invested while taking out money.
✅ Beat inflation by adjusting withdrawals over time.
It’s perfect for retirees, freelancers, or anyone who wants passive income without selling all their investments at once.
Key Terms in SWP
- Withdrawal Frequency – Monthly, quarterly, or yearly payouts.
- Withdrawal Amount – Fixed or flexible withdrawals.
- Inflation Adjustment – Increasing withdrawals yearly to match rising costs.
- Exit Load – Some funds charge a fee if you withdraw too soon.
- Capital Gains Tax – Tax on profits when you withdraw (STCG or LTCG).
Types of SWP
1. Fixed Amount SWP
- You withdraw a fixed sum (e.g., ₹10,000/month).
- Good for those who need consistent cash flow.
2. Appreciation-Based SWP
- You withdraw only the profits (keeps principal intact).
- Ideal for long-term wealth preservation.
3. Inflation-Adjusted SWP
- Withdrawals increase yearly (e.g., 5% more each year).
- Protects against rising living costs.
4. Flexible SWP
- Change withdrawal amounts as needed.
- Useful for irregular expenses.
Benefits of SWP
✔ Regular Income – Like a pension or salary.
✔ Tax Efficiency – Only capital gains are taxed, not the principal.
✔ Better Than FD – Higher returns than fixed deposits over time.
✔ No Market Timing Needed – Withdraw automatically without stress.
SWP vs Lump Sum Withdrawal
| Feature | SWP | Lump Sum Withdrawal |
|---|---|---|
| Regular Income | ✅ Yes | ❌ No (one-time) |
| Tax Efficiency | ✅ Better (only gains taxed) | ❌ Higher tax if withdrawn at once |
| Market Risk | ✅ Lower (phased withdrawals) | ❌ High (timing risk) |
| Inflation Protection | ✅ Possible (adjustable) | ❌ No |
How to Start an SWP?
- Choose the Right Fund – Equity funds for growth, debt funds for stability.
- Set Withdrawal Amount – Decide how much you need monthly.
- Select Frequency – Monthly, quarterly, or yearly.
- Enable SWP – Submit instructions to your mutual fund provider
FAQs
Is SWP a good investment?
SWP is a good investment if you need regular income while keeping your money invested. It works well for retirees, freelancers, or anyone who wants steady payouts without selling all their investments at once. However, returns depend on market performance-equity SWPs offer growth but with risk, while debt SWPs provide stability with lower returns. Use SWP for long-term income, not short-term gains.
Is SWP better than FD?
SWP can be better than FD for long-term wealth growth as it offers potentially higher returns (especially in equity funds) and tax efficiency. FDs are safer with guaranteed returns but often lose to inflation. Choose SWP for growth, FD for stability.