SWP is a commonly used term in mutual fund investments. It is short for Systematic Withdrawal Plan. A SWP is a mechanism for investors to withdraw money from their mutual fund investments at predetermined intervals. Rather than withdrawing the entire corpus in one go (lump sum withdrawal), investors can make withdrawals in a phased manner. SWP allows investors to customize the amount and withdrawal interval. Investors can choose to withdraw the capital gains or a fixed amount every month, quarter, semi-annually, or even annually.
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What is the SWP calculator?
The SWP calculator is an online tool that shows an investor the total withdrawals from his/her mutual fund investments along with the total value of the mutual fund investment post withdrawal. An investor can benefit from a regular income during retirement by using the systematic withdrawal plan.
The SWP calculator requires users to enter the total investment amount, monthly withdrawal amount, expected return rate per year, and the time period of the investment. Using these inputs, it provides the future value of an investment.
How to use Fisdom’s SWP calculator?
Fisdom’s Systematic Withdrawal Plan calculator is very easy to use. Once an investor enters the correct details in the relevant fields, the SWP calculator does all the computations and provides the final investment and withdrawal figures.
Here are the details to be entered in the calculator:
- Total investment: Enter your existing investment in a mutual fund scheme.
- Withdrawal per month: Enter the amount that you want to receive every month.
- Expected return rate (%): Enter mutual fund returns that you expect from the investment made.
- Time period: The total duration for which you wish to withdraw the invested amount. Minimum is 1 year and maximum can be 30 years.
Let us understand the functioning of Fisdom’s SWP calculator with an example. Suppose Ms. Nisha has an investment of Rs. 50 lakhs in mutual funds and wants to opt for SWP. She plans to withdraw Rs. 50,000 every month for the next five years. She expects returns from her investment at 10%. With this information, the final value of her investment will be Rs. 42,24,488. Total withdrawal that she will make at the end of the 5-year period will be Rs. 30,00,000.
How does an SWP calculator help investors?
Fisdom’s SWP calculator allows an investor to easily calculate the monthly withdrawal amount and the final amount of investment post withdrawal. If done manually, it can become a tedious task. Therefore, Fisdom’s SWP calculator comes in handy for quick calculations and precise cash flow figures. Here are some of the noteworthy benefits of Fisdom’s SWP calculator:
- Systematic Withdrawal Plan (SWP) allows investors to have a monthly income while continuing to earn a return on mutual fund investments. With an SWP calculator, an investor can easily compute both of these figures for better financial planning.
- The SWP calculator is simple to use and doesn’t require special skills on an investor’s part. An investor only needs to enter the variables in the given fields for the calculator to do the computation.
- Investors can use the SWP calculator to input different withdrawal amounts and determine various maturity amounts. This way, they can determine the monthly withdrawal amount that will suit their financial needs.
- Fisdom’s SWP calculator can be used for free and is readily available online.
When can an SWP scheme benefit investors?
The main purpose of a SWP is to offer a regular monthly income to investors, especially when they need liquidity in certain phases of life such as retirement. This is why it is mostly used by retired investors.
Systematic Withdrawal Plan is an optimal liquidity solution during retirement. Most people in India prefer to invest in traditional investment avenues to set aside the lump sum amount received at retirement. These traditional sources often attract taxes. SWP, however, is a tax-efficient mode of earning a regular income. Therefore, retirees can enjoy a regular income source with the added benefit of capital appreciation.
SWP is not meant for only retiring individuals and can also be used by people who have multiple dependents. Employees who have family responsibilities and require additional income sources can use the SWP option. This can help in covering expenses such as children’s educational needs, travel, financial goals, etc.
SWP is the better choice during fluctuating market conditions. It allows investors to remain invested in mutual funds despite making partial withdrawals. This way, investors can have a fixed, regular income from their investments. Through this option, investors can create a second income source apart from their regular earnings to meet their additional financial needs.
SWPs can also benefit an investor who may be nearing a financial goal. With SWP, one can ensure that the goal can be easily accomplished with no liquidity issues
The multiple benefits of SWP attract many investors to it. However, not many can manually estimate the exact benefits to be drawn out of a SWP. With a SWP calculator, one can determine the final amount left in an investment post withdrawal. For better financial planning, an SWP calculator can be used to estimate the amount required for personal financial needs.
SWP is advisable post retirement to ensure sufficient liquidity in the hands of the investor and a regular source of income.
No, SWP option can be used by any individual who has invested in a mutual fund scheme. It is not just for retirement and can be used for meeting liquidity needs at any time.
The periodic amounts in SWP can be chosen by an investor, and it is not fixed.
No, Fisdom SWP calculator is free to use for all and there are no charges involved. There is also no limit on the number of times one can use it.
Systematic Withdrawal Plan is a tax-efficient mode of fetching fixed income at regular intervals. Through this, investors can maximise their tax savings on long-term capital gains if the gains are under Rs.1 lakh.