How an SWP works
A Systematic Withdrawal Plan pays you a fixed amount from your mutual fund every month, while the rest of the money stays invested and keeps earning. Used well, it turns a corpus into a steady, tax-efficient income that can last decades.
Invest the corpus
Invest a lumpsum, such as your retirement savings, in a fund suited to steady withdrawals.
Withdraw monthly
A fixed amount is paid into your bank account every month, rising each year for inflation if you choose.
The rest keeps growing
The untouched balance keeps earning returns, which is what helps the money last much longer than cash would.
How the SWP is calculated
Each month, the withdrawal is taken out first and the rest earns a month of returns:
With an annual increase, the withdrawal for each year is:
"Max withdrawal" finds the highest starting monthly amount that still lasts the full period you chose.
The withdrawal rate that lasts
- Withdrawing less than the return the corpus earns means it can keep growing.
- Adding an annual increase protects your lifestyle from inflation, but uses up the corpus faster.
- Keeping 2 to 3 years of withdrawals in low-risk funds reduces the need to sell equity in a falling market.
Frequently asked questions
What is an SWP?
A Systematic Withdrawal Plan (SWP) withdraws a fixed amount from your mutual fund every month or quarter, while the remaining units stay invested.
How long will my money last with an SWP?
It depends on the corpus, the monthly withdrawal, any yearly increase and the return earned. The calculator shows the exact year the money runs out, if it does.
How much can I withdraw every month?
The calculator shows the maximum starting monthly withdrawal that lasts the full period you choose, at the return you expect.
How is SWP taxed?
Each withdrawal redeems units, and only the gain portion of those units is taxed as capital gains. That is usually far more tax-efficient than interest from a fixed deposit, which is fully taxed at your slab rate.
Should I increase my SWP every year?
Increasing it by 5% to 6% a year keeps your income in step with inflation. The trade-off is that the corpus is used up faster.
Are these returns guaranteed?
No. The return you enter is an assumption for illustration. Mutual fund returns are market-linked, and a fall early in retirement can shorten how long the money lasts. Taxes and fund expenses are not included.