SWP Calculator

SWP (Systematic Withdrawal Plan) lets you withdraw a fixed amount from a mutual fund every month while the remaining corpus stays invested and continues to earn returns. You instruct the fund house to redeem units worth your chosen amount each month. It is essentially the reverse of SIP - instead of accumulating a corpus through regular investments, you draw down a corpus through regular withdrawals. SWP is the most tax-efficient and flexible retirement income strategy available to Indian investors, far superior to breaking FDs or relying on dividends.

SWP from a balanced or equity-oriented fund can generate 9-12% annualised returns, significantly above the 6-7% FD rate. For a ₹1 crore corpus over 20 years, the difference in total income generated is enormous. FD interest is fully taxable at your slab rate (up to 30%), making the post-tax return even lower. SWP from equity funds is taxed as LTCG at 12.5% (for units held over 12 months), with only the gains component taxed - not the principal returned. The downside of SWP is market risk: in bad years, your corpus could shrink faster than expected. A balanced approach uses SWP from a hybrid or balanced advantage fund to reduce volatility.

The sustainable monthly withdrawal rate is your corpus multiplied by your annual expected return, divided by 12. For example, a ₹1 crore corpus earning 10% annually generates ₹83,333/month in returns. Any withdrawal under ₹83,333 leaves the corpus intact or growing. The well-known '4% rule' from US retirement research suggests withdrawing 4% of corpus annually is safe for 30 years - for India, with higher inflation (6-7%), a more conservative 3-3.5% annual withdrawal (₹25,000-₹29,000/month on ₹1 crore) is safer for very long retirements. This calculator shows the sustainable amount alongside your chosen withdrawal.

When your monthly withdrawal is higher than the monthly returns the corpus earns, you are eating into the principal. The corpus shrinks each month by the difference between withdrawal and return. Eventually the corpus depletes to zero. For example, a ₹50 lakh corpus earning 8% annually generates about ₹33,333/month in returns. A ₹50,000 monthly withdrawal exceeds this by ₹16,667/month - the corpus shrinks by that amount each month, depleting roughly in 4-5 years. This calculator shows you exactly when the corpus runs out and displays the unsustainable withdrawal warning so you can adjust before committing.

The 4% rule (from the Trinity Study) states that retirees can withdraw 4% of their portfolio annually and have a high probability of not running out of money over 30 years. For Indian investors with 6-7% inflation (higher than the US), a safer withdrawal rate is 3-3.5% from a balanced equity-debt portfolio. For a Rs. 2 crore corpus, the safe monthly SWP would be Rs. 2 crore x 3.5% / 12 = Rs. 58,333 per month. Invest the corpus 60% in equity and 40% in debt, withdrawing first from debt during market downturns to let equity recover - this sequence-of-returns strategy significantly extends portfolio longevity.

Balanced advantage funds (also called dynamic asset allocation funds) are the most popular SWP vehicle - they automatically shift between equity and debt based on market valuations, reducing the risk of withdrawing during market crashes. Hybrid aggressive funds (65% equity) offer higher growth potential with moderate volatility. Conservative hybrid funds suit retirees who prioritise capital preservation over growth. Avoid pure equity funds for SWP if you are already retired - a 30-40% market fall in year 1 of SWP combined with monthly withdrawals can permanently impair the corpus through sequence-of-returns risk. Pure debt funds yield 7-8%, barely keeping pace with inflation for long retirements.

Each SWP withdrawal is treated as a partial redemption of mutual fund units using FIFO (First In First Out) - the oldest units are redeemed first. The capital gain on each redemption = (units redeemed x current NAV) - (same units x purchase NAV). For equity funds, units held more than 12 months attract LTCG tax at 12.5% on gains above Rs. 1.25 lakh per financial year; units held 12 months or less attract STCG at 20%. For debt funds (after April 2023), all gains are added to income and taxed at the applicable slab rate regardless of holding period. The tax is calculated only on the gain portion, not the full withdrawal amount. If your SWP withdraws Rs. 50,000 per month and only Rs. 5,000 of each withdrawal is capital gain (the rest being return of original principal), your annual taxable capital gain is Rs. 60,000 - well within the LTCG exempt limit for equity funds.