Table of Contents
- Blog Introduction
- What Is SWP?
- How Does Systematic Withdrawal Plan Work?
- Features Of Systematic Withdrawal Plan
- Disadvantages of Systematic Withdrawal Plan
- Withdrawal Frequency of Systematic Withdrawal Plan
- Systematic Withdrawal Plan Options
- Duration Of Systematic Withdrawal Plan
- Systematic Withdrawal Plan Calculated Amount Projection Table
- FAQ About Systematic Withdrawal Plan
- Open Your Demat and Trading account with Zero Cost
Blog Introduction
Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Systematic Withdrawal Plan (SWP).
Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.
Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.
In this blog post I will be explaining my analysis on Systematic Withdrawal Plan. This will be a complete guide on Systematic Withdrawal Plan (SWP). Please read till end of the blog post to know the complete information about this Systematic Withdrawal Plan. Lets get started.
What Is SWP?
SWP stands for Systematic Withdrawal Plan. SWP is a method of regularly withdrawing money from an existing Mutual Fund at pre-determined intervals. The money withdrawn can be re-invested in another fund or can be kept as cash by the investor or can be used for personal expenses depending on your needs.
To make it easy if you have some lump sum amount with you, it can be invested in a fund and you can plan to withdraw some % of the interest earned every month or quarter as per your needs. The remaining outstanding balance will continue to earn interest. Hence you will get a regular income also your corpus will continue to grow.
This process is similar to Systematic Investment plan SIP , the only difference is, in SIP you used to invest money in a systematic a way to create the wealth . But in case with SWP you will be withdrawing money in a systematic way , still you will be able to create wealth. This is a very powerful investment approach for those who has some lump sum amount like a retired person or anyone who has a good corpus.
Let us take a small example with some investment and return. Suppose you have a corpus/lump sum amount of 1 Crore and you invest this in a fund with SWP mode. If we calculate at 12% interest rate (CAGR ) for 15 years with INR 70,000 monthly withdrawal After 15 years your Corpus or Principle amount will be 2 crore 13 lakhs . Is not it so amazing. Please read this complete article to understand more about Systematic Withdrawal Plan (SWP).
How Does Systematic Withdrawal Plan Work?
- Choose an existing mutual fund scheme where you have already invested your money or invest a lump sum amount in an “Open Ended” mutual fund scheme.
- Specify the withdrawal amount and withdrawal frequency (monthly, quarterly, etc).
- Specify the duration (for ex. 2 years or 15 years as you wants ) during which you want to withdraw the amount.
- You will receive the amount from mutual fund company as per your chosen withdrawal frequency.
- At the end of the term, you can opt for extending the withdrawal further or stop there.
- The lump sum amount in the existing mutual fund can remain invested or you can withdraw it, if any.
Features Of Systematic Withdrawal Plan
- Provides regular income to investors from their investments.
- Investor can choose the withdrawal amount and withdrawal frequency.
- Option to withdraw only the appreciated amount so that the capital amount remains invested.
- Even after your withdrawals, the remaining amount will remain invested and earns returns.
- SWP is better than dividends in terms of Tax effect.
- There is no TDS (Tax Deducted at Source) deducted for the withdrawn amount.
Disadvantages of Systematic Withdrawal Plan
- Depending upon the performance of the fund, withdrawals can eat into your capital amount and you may have zero Rupees at the end. Hence you need to plan your withdrawal amount as per the market performance to save your Capital .
- SWP is nothing but taking out money from an existing mutual fund. So, depending upon the fund and withdrawal timeline, STCG (Short Term capital Gains) tax or LTCG (Long Term capital Gains) tax may be applicable.
- Depending upon the fund and withdrawal timelines, there may be exit load fees for withdrawing.
- Investors are not allowed to participate both SIP and SWP in one mutual fund scheme.
- You can’t opt for SWP facility under “Close Ended” mutual funds
Withdrawal Frequency of Systematic Withdrawal Plan
You can opt for one of the following withdrawal modes to withdraw through SWP.
- Monthly.
- Quarterly.
Systematic Withdrawal Plan Options
In SWP, you can opt for one of the withdrawal methods.
- Withdraw fixed amount : In this method, you can opt for withdrawing a fixed amount every withdrawal period. For example, you may choose to withdraw Rs. 5,000/- every month or Rs. 10,000/- every quarter. This method provides a regular income but the drawback is that it can reduce your capital amount considerably over time.
- Withdraw appreciated amount : In this method, you can opt for withdrawing only the appreciated amount during the withdrawal period. For example, let us assume that your investment will give returns of Rs. 10,000/- during a quarter. So, you will receive Rs. 10,000/- and your capital investment will remain the same and invested. Another example, let us assume that your investment doesn’t give any returns during a month or quarter, then you will not receive any amount. This method is good for those who wants to receive only the appreciated amount and wants to protect the lump sum capital amount.
Duration Of Systematic Withdrawal Plan
- Minimum duration is 6 months in case of monthly withdrawal.
- Minimum duration is 12 months in case of quarterly withdrawal.
- There is no maximum duration for withdrawal. You can withdraw as long as you have funds or till the funds reaches zero Rupees.
Systematic Withdrawal Plan Calculated Amount Projection Table
| Lump Sum Deposit Amount | Expected Rate of Interest % | Regular Monthly Withdrawal Amount | Final Balance After 5 Years | Final Balance After 10 Years | Final Balance After 15 Years | Final Balance After 20 Years |
| 10,00,000 | 12% | 6000 | 12,75,205 | 17,60,211 | 26,14,957 | 41,21,311 |
| 15,00,000 | 12% | 10000 | 18,31,618 | 24,16,043 | 34,46,001 | 52,61,137 |
| 20,00,000 | 12% | 14000 | 23,88,031 | 30,71,876 | 42,77,044 | 64,00,963 |
| 25,00,000 | 12% | 18000 | 29,44,445 | 37,27,709 | 51,08,088 | 75,40,788 |
| 30,00,000 | 12% | 22000 | 35,00,858 | 43,83,542 | 59,39,132 | 86,80,614 |
| 35,00,000 | 12% | 26000 | 40,57,271 | 50,39,375 | 67,70,176 | 98,20,440 |
| 40,00,000 | 12% | 30000 | 46,13,685 | 56,95,207 | 76,01,220 | 1,09,60,265 |
| 45,00,000 | 12% | 35000 | 50,88,908 | 61,26,767 | 79,55,829 | 1,11,79,261 |
| 50,00,000 | 12% | 40000 | 55,64,132 | 65,58,327 | 83,10,438 | 1,13,98,256 |
| 75,00,000 | 12% | 55000 | 87,52,146 | 1,09,58,855 | 1,48,47,831 | 2,17,01,536 |
| 1,00,00,000 | 12 | 75000 | 1,15,34,212 | 1,42,38,019 | 1,90,03,051 | 2,74,00,664 |
FAQ About Systematic Withdrawal Plan
Is SWP A Financial Product?
No. SWP is not a financial product. It is just a method to withdraw money from Mutual Funds.
How to Strat a SWP?
First you need to choose a Mutual Funds. After that you need to visit to the respective Mutual funds company’s Website and opt for the SWP. or you can directly contact the mutual fund house to help you. For More details click here
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