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Generate a steady monthly income with our SWP calculator. Plan systematic withdrawals from your mutual fund corpus while ensuring your remaining capital continues to grow tax-efficiently.
Calculations assume money retains its current purchasing power.
Total Investment
₹10.00 Lakh
Interest Earned
₹33.98 Lakh
Maturity Value
After 15 Years
₹34.98 Lakh
While SIP is for wealth creation, Systematic Withdrawal Plan (SWP) is for wealth consumption. It allows you to withdraw a fixed amount from your mutual fund investments at regular intervals. It is widely considered the most tax-efficient way to generate a "monthly salary" during retirement.
Unlike dividends, which are controlled by the fund house and are fully taxable at your slab rate, an SWP gives you control. You choose the amount and the date. More importantly, only the "gain" portion of your withdrawal is taxed, not the entire amount, making it significantly more efficient.
The biggest risk with SWP is withdrawing too much too fast. If your withdrawal rate is higher than your portfolio's growth rate, your principal will start depleting. This is known as negative amortization or reverse compounding.
Q: What is the 'Safe Withdrawal Rate' in an SWP strategy?
A Safe Withdrawal Rate is the percentage of your portfolio you can withdraw annually without running out of money before you die. While the '4% Rule' is a famous benchmark in the US, in India, you must adjust it based on higher inflation and market volatility. Ideally, if your equity-heavy portfolio earns 12% on average and inflation is 6%, withdrawing 4-6% annually is generally considered safe, as it allows the remaining balance to continue growing and keep up with rising costs.
Q: Is SWP more tax-efficient than a Dividend payout for retired individuals?
Yes, usually. In an SWP, each withdrawal is considered a mix of 'principal' and 'capital gains.' Only the GAIN portion is taxed. If held for over a year, these are Long-Term Capital Gains, which enjoy a ₹1.25 Lakh exemption limit and a lower 12.5% tax rate. In contrast, dividends are taxed fully according to your income tax slab (which could be up to 30%). For those in higher tax brackets, SWP is significantly more efficient for generating monthly income.
Q: How can 'Sequence of Returns Risk' impact my SWP plan?
Sequence of Returns Risk is the danger of a market crash happening early in your retirement when you are just starting withdrawals. If you withdraw ₹50,000 every month while the market is down 20%, you are forced to sell many more units to meet that cash requirement, which can permanently deplete your portfolio. To mitigate this, many advisors suggest keeping 2-3 years of withdrawal amounts in a safe Liquid/Debt fund and only drawing from the Equity fund when markets are performing well.
Q: Can I use SWP from an ELSS (Tax-Saving) fund?
You can only start an SWP from an ELSS fund *after* the mandatory 3-year lock-in period has expired for the respective units. Since SIP units in ELSS have individual lock-in periods, you need to be careful with the timing. Once the units are free, SWP works the same way as any other equity fund, providing a tax-efficient way to utilize your tax-saved corpus for regular needs.
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