Question 1

What is a Systematic Withdrawal Plan (SWP)?

Accepted Answer

An SWP allows you to withdraw a fixed amount of money regularly (usually monthly) from your mutual fund investments. It is the opposite of a SIP. It is commonly used by retirees to generate a steady pension-like income from their accumulated corpus.

Question 2

How does an SWP work?

Accepted Answer

When you start an SWP, the mutual fund AMC sells a certain number of units from your accumulated corpus every month to generate the fixed withdrawal amount you requested. Meanwhile, your remaining units continue to grow at the market return rate.

Question 3

Is SWP better than Dividend payouts?

Accepted Answer

Yes, SWP is generally considered more tax-efficient and reliable than IDCW (Dividend) options. Dividends are taxed according to your income tax slab, and the amount/frequency is not guaranteed. SWP allows you to set the exact amount you need, and only the capital gains portion of the withdrawal is taxed.

Question 4

What is a safe withdrawal rate for SWP?

Accepted Answer

A common rule of thumb is the 4% to 6% annual withdrawal rate. For example, if you have a corpus of ₹1 Crore, withdrawing ₹4 Lakh to ₹6 Lakh per year (₹33k to ₹50k per month) is generally considered sustainable over long periods, assuming your corpus grows at 9-10% annually.

Question 5

What happens if my withdrawal is higher than the returns?

Accepted Answer

If you withdraw more than what your corpus earns in returns, your principal amount will start depleting. Eventually, the entire corpus will reduce to zero. You can use our SWP Calculator to check exactly when your corpus will run out based on your expected rate of return.

SWP Calculator — Systematic Withdrawal Plan

Frequently Asked Questions

SWP Calculator — Systematic Withdrawal Plan

Frequently Asked Questions

More Free Financial Calculators