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Systematic Withdrawal Plan (SWP)

 

For those looking to secure their financial future after retirement, they may want to consider the Systematic Withdrawal Plan (SWP). It can allow an individual to access a steady income from their investment. The Systematic Withdrawal Plan is an exact opposite of the Systematic Investment Plan, where you can invest a fixed amount of money, allowing your investments to grow over the time when properly managed with SWP, individuals can withdraw a predetermined percentage of their investments monthly, quarterly, or yearly, depending on their financial needs.

Example, let's consider the case of Mr. Amit Kumar, a 60-year-old with a retirement corpus of 40 lakhs. Amit has decided to diversify his investments by putting some of his money into the equity market, fixed deposits, and implementing a Systematic Withdrawal Plan to meet his monthly expenses.

Amit Kumar's Investment in SWP: Rs. 20,00,000/-

Investment Period: 20 years

Expected Annual Return: 15%

Planned Monthly Withdrawal: Rs. 15,000/-, with an annual increase of 9%

Total Withdrawn Amount in 20 years: Rs. 36,00,000

Even after withdrawing a total of Rs. 36,00,000 over 20 years, Amit's investments have continued to grow. At the end of the 20-year period, he will receive a total of Rs. 1,30,57,471.00.

However, if Amit were to withdraw the same amount he assumes as interest on a monthly basis, he might end up with a negative balance, or his investment may deplete entirely before the 20-year mark. 

check SWP Calculator.

Some Key features:

Investment:  Individual can start by investing a fixed amount in SWP by selecting fund or a diversified portfolio of funds.

Withdrawal Schedule: Investors can decide the withdrawal as per their financial needs like monthly etc.,  so that he can receive the specific amount every month.

Withdrawal Amount:  Individual can withdraw the amount based on their monthly expenses or needs, it should be half of the assume or expected rate of interest and not similar or not more than that.

Automatic Transfer:  After completion or start your Systematic Withdrawal Plan, the amount automatically transfer to your bank account every month or as per the schedule you fixed.

Management:  After the automatic withdrawals, the remaining investment can potentially grow or shrink as per the market scenario; it can be managed by the fund manager.

Following are the top 4 Best Systematic Withdrawal Plan:

Sr. No.

SWP Name

Returns

1

HDFC Retirement Savings Fund Equity Plan

24.40%

2

ICICI Prudential Equity & Debt Growth Fund

20.07%

3

Tata Retirement Savings Progressive Fund Direct Plan Groth

13.52%

4

SBI Equity Hybrid Fund Growth

9.35%


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