Get monthly income after retirement with SWPs!

What is SWP?

An SWP, or Systematic Withdrawal Plan, allows you to withdraw a set amount of money from your mutual fund at regular intervals, like monthly or quarterly, by automatically selling some of your units.

How does SWP work?

Set your SWP: Once you’ve invested enough in mutual funds, you can set up a Systematic Withdrawal Plan (SWP) with your broker to get regular payouts.

Withdrawal Amount: You decide how much and how often to withdraw—monthly, quarterly, etc. The fund automatically sells the required units to match your withdrawal.

Units redeemed: The number of units sold depends on the fund's NAV. Higher NAV means fewer units are sold; lower NAV means more units.

Steady income: The withdrawal amount is credited to your bank account, giving you a reliable income.‍

Investment grows: The remaining units stay invested and keep growing based on the market.

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Example

Meet Raj, who has been diligently investing in a mutual fund that offers SWP over the last 30 years of his career.

Now that Raj is retiring, he wants to ensure a steady stream of income instead of withdrawing his savings all at once.

He decided to set up a Systematic Withdrawal Plan (SWP) after retirement for 30 years to help manage his finances during retirement.

Here’s how Raj sets up his SWP

SWP calculator

Process

Setting up SWP: Raj instructs his broker to set up an SWP where ₹40,000 is withdrawn from his fund balance every month.‍

Monthly withdrawals: On the first of each month, the mutual fund redeems the equivalent number of units based on the current Net Asset Value (NAV). This amount is then transferred to Raj's bank account.

Benefits for Raj

• Regular Income: Raj receives ₹40,000 every month, which supplements his pension, helping him cover daily expenses without financial worry.
• Investment Growth: Since Raj isn’t withdrawing all his money, the remaining investment keeps growing, helping him earn more profits over time.

By setting up an SWP, Raj can enjoy financial stability without worrying about market fluctuations or outliving his savings.

Taxation of SWP

When you redeem your mutual fund holdings via SWP, you may earn capital gains on redemption. Those capital gains are taxed based on the type of mutual fund redeemed and its period of holding.

4 ways SWP can help apart retirement

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Supplementing Income

If you’re planning to start a new venture, take a career break, or to switch jobs, your income may not be predictable. Setting up an SWP from your mutual fund investments can give you a steady monthly cash flow to meet your needs.

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Funding Higher Education

If you’ve got kids heading to college, an SWP can be a lifesaver. Instead of paying tuition fees in big chunks, you can invest money monthly and use an SWP to manage these expenses semester by semester.

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Managing Emergency Funds

‍During times like the pandemic, when financial instability is common, setting up an SWP can provide regular income from your emergency savings or investments to cover daily expenses.

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Systematic Reinvestment

As you approach a big financial goal, like buying a house or funding a large project, you might want to start securing your profits. An SWP can help you gradually shift money from Investments to EMIs.

SWP could be a smart way to secure your- retirement, steady income, and investment growth without the need for constant management.

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Summary

To make your life easier, we have summarised the above Read here. Hope you enjoyed it!