Understanding Your Systematic Withdrawal Plan (SWP)
Our SWP Calculator helps you estimate regular withdrawals from your investments and monitor your corpus over time.
What is SWP?
SWP stands for Systematic Withdrawal Plan. It is a facility offered by mutual funds that allows investors to withdraw a fixed amount of money at regular intervals (e.g., monthly, quarterly, annually) from their investment corpus.
SWP is a popular choice for individuals seeking a regular income stream from their investments, particularly during retirement or for specific financial goals.
How SWP is Calculated
Unlike SIP (Systematic Investment Plan) where you invest regularly, SWP involves withdrawing regularly. The calculation considers:
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Initial Investment (P)The total amount of money initially invested.
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Monthly Withdrawal Amount (W)The fixed amount you wish to withdraw each month.
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Expected Annual Return (R)The anticipated annual growth rate of your investment.
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Withdrawal Tenure (N)The total period in years for which withdrawals are planned.
The calculator simulates the fund's performance by applying the expected return and deducting the monthly withdrawals to show the remaining corpus and total withdrawals over time. There isn't a single formula like EMI; it's a step-by-step calculation:
$$Corpus_{new} = (Corpus_{old} \times (1 + \frac{R}{12 \times 100})) - W$$
Where:
- $Corpus_{new}$ = Corpus after withdrawal and return for the month
- $Corpus_{old}$ = Corpus at the beginning of the month
- $R$ = Annual Return Rate
- $W$ = Monthly Withdrawal Amount
Understanding the SWP Schedule
The SWP schedule provides a year-wise breakdown of your investment. It shows the opening balance, total withdrawals made in that year, returns earned on the remaining corpus, and the closing balance. This helps you visualize how your initial investment changes over the withdrawal period.
It's crucial for understanding the sustainability of your SWP and ensuring your corpus lasts for your desired tenure.