What is Systematic withdrawal plan (SWP) calculator?
SYSTEMATIC WITHDRAWAL PLAN (SWP) CALCULATOR
EXPECTED RETURNS 15 %
TIME PERIOD 5 Years
SYSTEMATIC WITHDRAWAL PLAN (SWP) CALCULATOR
If you are a regular investor in mutual funds, you must be familiar with terms like mutual fund SWP calculator and systematic withdrawal plan calculator India. The mutual fund SWP calculator helps you to work out a model how you can profitably draw down your corpus in a systematic manner. Let us take a detailed look at the systematic withdrawal plan calculator India.
WHAT IS SYSTEMATIC WITHDRAWAL PLAN?
Before we get into the nuances of the systematic withdrawal plan calculator or SWP calculator, let us start by looking at what this concept of systematic withdrawal plan or an SWP is all about. This is a structured drawdown plan offered by mutual Funds, where you withdraw a fixed amount periodically from the scheme. When you draw a fixed small amount from the corpus, it is better than withdrawing a lump sum at one go as the remaining funds in the mutual fund continue to earn returns.
Normally, if you are retired and plan to live out of your accumulated corpus, then SWP helps to fulfil your monthly cash flow needs. It is most suitable during retirement when you actually need funds for your sustenance. You can look at the SWP as the reverse of a SIP. In an SIP you invest in a phased manner while in an SWP you withdraw in a phased manner. That way, you can draw down your entire corpus over 20-25 years post retirement and not worry about just taking out the returns. Also, the SWP is more tax efficient as the tax is only imposed on returns and SWP has a large principal component too.
HOW TO CALCULATE SWP?
Let us get down to understand how to actually calculate the SWP amount using the systematic withdrawal plan calculator or SWP calculator. It is quite simple and you just need to follow certain simple steps. Let us outline the key steps for the use of the systematic withdrawal plan calculator or SWP calculator.
- We mentioned earlier and reiterate that SWP is not a product but just a structure or an option. So, to calculate the first step is to choose SWP as an action point. That is the starting point to use the systematic withdrawal plan calculator or SWP calculator.
- Choose the specific fund that you want to do the SWP on. There are generic calculators but it is best to have calculators that are focused on fund wise returns to make them more actionable. There are no hard and fast rules but normally SIPs are done on equity funds and SWPs are done on debt funds.
- The next step in the systematic withdrawal plan calculator or SWP calculator is to select the specific option like Growth versus Dividend or Regular versus Direct. It is best to keep a combination of Growth Option and Direct Plans for maximum effect.
- Now we get to the brass tacks of the systematic withdrawal plan calculator or SWP calculator. Now you must enter the initial investment date and amount. This is your starting corpus and the date will determine the applicable NAV. That is where the SWP actually starts.
- Normally, the frequency of withdrawal is monthly, but you are at liberty in a systematic withdrawal plan calculator or SWP calculator to decide the frequency. It can be quarterly, monthly, fortnightly or even weekly. The choice is yours.
- Now comes the most important part and that is to select the amount you plan to withdraw each month. This will be entirely based on your own needs and your own assessment of how much you need to manage your expenses. This withdrawal amount can be selected either in terms of percentage or in terms of amount.
- Now you must decide how long you want the SWP to continue. Typically, if you retire at 60 and want to be provided till the age of 85, select 25 years as the withdrawal tenure of the systematic withdrawal plan calculator or SWP calculator. You are required to select the specific dates.
- Finally, the systematic withdrawal plan calculator or SWP calculator gives you the output in terms of the total amount you will withdraw over the tenure and how much you will be left at the end of the SWP. You can actually simulate various scenarios and then work out your tenure and withdrawal amount accordingly.
FREQUENTLY ASKED QUESTIONS
What is the use of SWP Calculator?
The systematic withdrawal plan calculator or SWP calculator is used to work out how you can withdraw from your corpus (typically retirement corpus) over a period of time at the time making money work hard for you. The systematic withdrawal plan calculator or SWP calculator asks for some basic inputs from your side and the calculator gives the output of your choice.
Can I choose the withdrawal amount or is it fixed?
In the systematic withdrawal plan calculator or SWP calculator you can choose the withdrawal amount based on how much you want to take out on a periodic basis depending on your cash requirements. That is entirely at your withdrawal.
When to use SWP?
The systematic withdrawal plan or SWP is used when you want to gradually and systematically yet productively draw down from a corpus. Typically, when you are retired and want to live of your corpus. You can use an SWP. This can be calculated by using a simple systematic withdrawal plan calculator or SWP calculator online.
Is an Existing SIP compulsory for SWP?
Not at all. As you would be able to see when you use a systematic withdrawal plan calculator or SWP calculator, the SWP is done on a starting corpus, which is a lump sum amount. Typically, this is built through SIP. For example, an investor would create a corpus of funds by retirement using SIP and then gradually draw down the corpus using SWP. Such nuances can be easily witnessed using the systematic withdrawal plan calculator or SWP calculator.
Who is eligible for SWP?
There is no eligibility for SWP. Anyone who has a corpus and wants to draw down the corpus over a period of say 15-20 years can opt for the SWP. The systematic withdrawal plan calculator or SWP calculator will give you the exact information on the working of the SWP.
How to invest in SWP?
SWP is not a product, but a structure. Like you select SIP as an option while investing in a mutual fund, you can select SWP as an option to draw down your corpus. The mutual fund AMC offers this option to the investors. You can do a complete calculation of the draw down using the systematic withdrawal plan calculator or SWP calculator online.