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Systematic Withdrawal Plan to Generate Regular Income: The Complete Guide


Every individual's requirements differ when it comes to financial needs. Due to this, you need to have the right investment plan that is unique and serves your requirements. While some prefer investing in a lump sum, others prefer a more staggered approach like a SIP.
 

There are some differences to consider with financial goals. Some people may consider capital growth, and others may want regular income. To meet these varied expectations, different fund houses of many facilities. One of which is a Systematic Withdrawal Plan (SWP).
 

Let's understand what SWP is through this blog:
 

What is a Systematic Withdrawal Plan (SWP)?
 

A Systematic Withdrawal Plan is an option offered by Unit Linked Insurance Plan (ULIP) and mutual funds. It gives you the option to withdraw a fixed amount of money at regular intervals. This can happen monthly, quarterly or even annually.

This strategy is useful for those who wish to generate regular income without changing the principal investment. It is an ideal option for retired individuals seeking a consistent cash flow.

When starting an SWP, you need to keep in mind the following:
 

  • The withdrawal amounts

  • Frequency of the withdrawal

After the withdrawals, the pending funds function according to your investment strategy. You can use SWP calculators to help compute your maturity amount. Also, determine your monthly withdrawals.
 

Who Should Consider SWPs?
 

SWPs are preferred by those who want to have a regular income stream from their investments. Other options like Income Distribution Cum Capital Withdrawal (IDCW) could also be considered. These plans also provide payouts from time to time. However, the payout declaration depends on the fund house's discretion for these plans. So, they do not offer similar predictability as that of SWPs.
 

SWPs can also be a great choice for those who wish to have a disciplined investment approach. And who prefer withdrawing money from their invested savings. When they set up a fixed withdrawal amount, they can avoid overspending.
 

What are the Features of a Systematic Withdrawal Plan?
 

Given below are some of the features of a Systematic Withdrawal Plan:
 



  • Regular Income

    SWP plan lets you receive a fixed amount of money on a regular basis. This acts as a reliable income stream.

  •  

  • Flexibility

    You have the flexibility to determine the withdrawal frequency. You can also choose the amount you wish to withdraw as per your requirements.
     

  • Continuous investment

    With an SWP plan, the remaining funds continue to be invested. You still get the potential benefit from market returns. You also get to experience the growth of your investments.
     

  • Diversification

    SWP provides you with an option to diversify your income sources. This allows you to spread your risk and improve your portfolio performance.


What is the SWP Calculator?
 

The Systematic Withdrawal Plan calculator is an excellent tool. It lets you calculate how much amount of money you can withdraw from your investment. This is keeping in mind the original investment value.
 

This tool can come in handy when you need to make important financial decisions.
 

If you are a retiree, this tool can be used to plan your income. You can decide and enable periodic withdrawals. The calculator takes into account multiple factors. These include the investment time horizon, the current value of the portfolio, and the desired withdrawal amount.
 

The SWP calculator can determine the amount of money you need to save every month. This helps in getting the desired monthly income in retirement.
 

How do the SWP Calculators work?
 

When it comes to choosing a SWP, you may not have to get into manual calculations. An SWP calculator can help with the calculations instantly. You need to know the following:
 

  1. The total withdrawal

  2. Amount of investment

  3. Withdrawal frequency

To calculate the final value, you need to multiply the amount withdrawn each year by the years of return.
 

Given below is a step-by-step instruction of using an online SWP calculator:

  • Input the full investment amount

  • Input the per-month withdrawal.

  • Select the anticipated rate of return.

  • Type in the required time

  • Select 'Calculate'

The result will be displayed instantly. The ease of using this calculator makes SWP an even more lucrative option for even a newbie to consider.


Conclusion
 

Systematic Withdrawal Plan is an excellent tool to consider. Especially for those who wish to have some flexibility with their investments. Whether you are a newbie or have been investing for a long time, SWP will still be a great option for you. It can help you in reaching your financial goals and help streamline your financial plan.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Frequently Asked Questions

How can I use the SWP calculator for retirement planning?

SWP plans are great for retirement planning. Using the SWP calculator, you can estimate how much money you need to retire. Based on this amount, you will know how much you should save each year to reach your goal. It can also help determine how your savings will grow after a specific period. Also, how much money you can expect in your retirement

What is the eligibility criteria for SWP?

There is no specific eligibility for SWP. However, you must have some degree of financial planning in place before starting SWP. Anyone wishing to withdraw money over a specific duration, like 10 or 20 years, may choose SWP.

Is SWP the right choice for me?

When you consider market volatility, yes, SWP is a great choice. You have the option to make partial withdrawals. You can maintain the rest of the money in your fund and let it grow to earn more benefits. You can also expect a steady return on investments. SWPs act as a secondary source of income for most people.