SWP Calculator

A Systematic Withdrawal Plan (SWP) is a financial strategy offered by mutual funds, allowing investors to receive a regular stream of income from their investments. It is particularly useful for individuals looking to create a steady income stream during their retirement years or any other period when they need regular cash flow.

How does Systematic Withdrawal Plan (SWP) works?

  • Investors invest a lump sum amount in a mutual fund.
  • They set a withdrawal frequency (monthly, quarterly, etc.) and amount.
  • The mutual fund sells a portion of the units to generate the withdrawal amount.

The future value of the investment in systematic withdrawal is calculated using the following formula:

FV = P × ( 1 + I R ) T − WFM × ( 1 + I R ) T − 1 ( 1 + I R ) 1 12 − 1 \text{FV} = P \times (1 + IR)^T - \frac{\text{WFM} \times (1 + IR)^T - 1}{(1 + IR)^{\frac{1}{12}} -1 }

Here:

  • FV is the future value of the investment
  • P is the total investment before systematic withdrawal starts.
  • WPM is the monthly withdrawal amount
  • IR is the yearly interest rate in decimal value.
  • T is the total number of years

Benefits of Systematic Withdrawal Plans:

  • SWP provides a steady income stream, making it suitable for retirees or those looking for regular cash flows.
  • Fixed withdrawals are not dependent on market conditions.
  • Capital gains are spread over the withdrawal period, potentially reducing the tax burden.
  • Investors can adjust the withdrawal amount or frequency based on changing financial needs.
  • SWP allows investors to maintain their capital while generating income.

If you are considering starting an SWP, talk to a financial advisor to get personalized advice.

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