Imagine This Scenario
You’ve worked hard your whole life. Now, retirement is either here—or just around the corner. Your salary stops, but your monthly expenses keep rising, thanks to inflation. The old fallback— bank fixed deposits (FDs)—no longer offer enough returns to match your growing needs.
So, what’s the solution?
Enter: Systematic Withdrawal Plan (SWP) — a powerful but underused investment tool.
What is SWP?
SWP (Systematic Withdrawal Plan) allows you to withdraw a fixed amount at regular intervals (monthly, quarterly, etc.) from a mutual fund where you’ve already made a lump sum investment.
It’s like getting your own pension from your investments— smarter, more flexible, and potentially more rewarding.
How Does It Work?
- Invest a lump sum in a mutual fund scheme.
- Choose the amount and frequency of withdrawal.
- Every month, the amount is credited to your bank by redeeming a few mutual fund units.
- The rest stays invested, continuing to grow based on the market.
Simple. Efficient. Tax-smart.
Why SWP is a Game-Changer
❖ Regular Income: Perfect for retirees or anyone needing monthly cash flow
❖ Capital Growth: While you withdraw, the remaining funds continue to earn returns
❖ Flexibility: You decide how much and when to withdraw
❖ Tax Benefits: Only capital gains are taxed—not the full amount withdrawn
❖ Beats Inflation: Especially when you choose the right mix of hybrid funds
Example: What Happens If You Invest ₹50 Lakhs?
Investment Summary:
- Initial Investment: ₹50,00,000
- Assumed Return: 12% p.a. (compounded monthly)
- SWP Amount: ₹25,000/month
- Tenure: 30 years (360 months)
Results After 30 Years: Particulars Amount (₹)
Total Withdrawals (SWP) ₹90,00,000
Fund Value Remaining ₹5,37,88,000 ✅
Total Benefit (Withdrawals + Value) ₹6,27,88,000
Over 30 years, you withdraw ₹90L and your investment still grows to over ₹5.37 crore – that’s the power of long-term compounding!
How This Works:
- You withdraw ₹25,000/month (₹3L/year), which is only 6% of the initial investment.
- Since the return (12%) is much higher than the withdrawal rate (6%), the fund value keeps compounding rapidly.
- After 30 years, your corpus multiplies more than 10×, even after 360 withdrawals.
Key Insights: - Total Withdrawals: ₹25,000 × 12 × 30 = ₹90,00,000
- Corpus Value after 30 years: ₹5.38 crore
- Net Wealth Created: Over ₹5.5 crore in addition to monthly income
Tax Consideration:
- Each ₹25,000 withdrawal consists of part principal + capital gains.
- Only the capital gains portion is taxable.
- For equity-oriented funds, LTCG after 12 months is taxed at 12.5% (with ₹1.25L annual exemption).
Ideal For:
- Retirement income for 30+ years
- Early retirees
- Long-term wealth transfer planning
- Professionals building passive income
