Insurance

How to make a full proof retirement plan using SWP?

24th Mar 2025

Not everyone who retires gets to rest.

A lot of people never reach a retirement corpus sufficient to sustain their remaining life without making more money.

But the crazy part is—even the ones who do hit their target corpus can still run out of money.

Because the real problem isn’t just building a corpus. It’s knowing how to use it smartly.

Everyone tells you only half of the picture. Well, this READ is going to change that forever!

How much would you actually need to retire?

The table below shows the amount you approximately need to retire (cover your expenses for 20 years without working) considering your annual expenses and time to retire.

This table is based on inflation @ 7%.

The difference with every 10 years passing is almost double. So it's essential to get started as soon as you can.

But the question is—

How to build your retirement fund?

While it’s a no-brainer to keep working on your skills and trying to scale as much as you can, investing is a solid long-term option to get there.

Here’s how much you need to invest monthly at a rate of return of 12% p.a. on your investments:

Looks steep, right?

Yet, the worst part is reaching your retirement corpus is only half of the job done.

If you don’t plan it well enough you still might not be able to live with peace even if you get to the corpus. Here’s what we forget to think about:

How to plan finances?
How to plan out taxes?
How to withdraw money?
How to make sure it stays safe and grows post retirement?

Well, we have found out something amazing for you—SWP!

What is SWP and how does it work?

SWP, or Systematic Withdrawal Plan, lets you withdraw a fixed amount from your mutual fund at regular intervals—monthly, quarterly, or yearly.

It’s a way to create steady income after retirement—without liquidating your entire investment.

You can set up a SWP on your mutual funds investments through AMC / Bank websites, or demat / mutual fund accounts. Choose the amount, frequency and dates. Start receiving money in your bank account on the selected dates.

The best part is you stay invested while receiving monthly payouts, offering both growth and cash flow.

To know more about SWP check this out!

The Plan!

But first the dilemma:

Equity gives you high returns and has a very low probability of risk/loss if invested for a long term say 20-30 years . Hence if you want to build a significant corpus, equity is the way to go.

Pro-Tip: Invest in Index Funds which follow broad market indices like Nifty 50 or Nifty bank for a relatively safer investment option.

But, once you retire the scene changes!

Equity can be really volatile in the short term and you run the risk of booking huge losses while getting your systematic monthly withdrawals.

Example:

Higher units are sold when the price is less—taking a comparatively bigger chunk out of your portfolio. Then what can we do?

Split your retirement corpus

A smart way is to split your portfolio into 3 buckets once you reach retirement.

40% Equity
30% Hybrid-Equity-Oriented Funds
30% Debt + Hybrid-Debt-Oriented Funds

This way you can set-up your SWP from your Debt Funds and be safe from the volatility, while your money invested in equity helps it grow faster.

Pro-Tip: Keep moving your profits from Equity Funds to Debt on an annual basis to make sure there’s enough to meet recent needs and urgencies.

But there’s an issue, let’s understand that with an—

Example

Suppose at Retirement Hari has a corpus of 10Cr. But all of it is in equity.

Before setting up SWP Rahul wanted to move 30% of it to debt funds.

He sells 3000 Units (30%) to move funds to Debt funds and set-up SWP.

Hari loses a huge amount of money only to move funds.

But, here's a smart alternative!

NPS Tier-II Funds.

These work like any other mutual fund, with options like equity, debt, and hybrid to choose from. But the only eligibility criteria is—you need to have a NPS Tier-I account.

Here’s how it helps:

1/ NPS Tier-II lets you move your funds across categories without any LTCG. So, 0 Tax while moving funds from Equity to debt post retirement. NPS also has a similar option to SWP called SLW (Systematic Lump-sum Withdrawal). So you can use this to get a monthly pension using your funds moved to debt.

2/ You can also transfer your Tier-II funds to Tier-I before retirement and get 60% of the amount lump-sum and tax free while also getting a steady monthly pension.

If you’d like to know in detail how it works, check this out!

The entire recipe for retirement?

Let’s sum it all up and prepare your recipe for the full-proof retirement plan—

1/ Figure out your basic expenses today

Let’s say it's ₹50,000/month or ₹6 lakhs a year.

2/ Estimate how much you’ll need post-retirement

Use this rule of thumb:

Retirement Corpus= Annual expenses @ Inflation ( till time to retire) x 25

3/ Build your retirement corpus

Inflation is wild. Plan early. Start investing monthly. The earlier you start, the lower the burden.

4/ Pick your investment tools wisely

Start with Equity Funds (for growth)
Use NPS for tax-free conversion to different categories, tax savings and retirement pension

5/ Reach corpus? Split it smartly.

Move at-least 30% funds to debt before you set-up SWP.

6/ Now set up your withdrawals

Don’t withdraw the investment entirely or in un-planned lumpsums. Use SWP for mutual funds or SWL for NPS. You’ll get a monthly payout while the rest of your money keeps growing.