SWP Calculator - Systematic Withdrawal Plan Calculator

What is a Systematic Withdrawal Plan (SWP)?

In simple terms, a SWP or Systematic Withdrawal Plan is a structured way to withdraw money from your existing investment. Think of it as the opposite of a Systematic Investment Plan (SIP). While SIP helps you to invest small amounts regularly to build wealth over time, SWP allows you to withdraw fixed amounts at regular intervals and acts as a consistent source of income.

When you opt for a SWP, a set number of units from your investment are redeemed, and the proceeds are directly transferred to your bank account. Unlike a lump sum withdrawal, where everything is taken out in one go, SWPs make it easier to manage funds by taking them out over a period. SWPs are great for retirement planning, passive income, or managing regular expenses without withdrawing everything at once.

For example, suppose you have made an investment of ₹5 lakh. If you decide to withdraw money using a SWP of ₹5,000 per month, you will be able to sustain the SWP for 10 months. Every month, ₹5,000 will be credited to your bank account while the remaining investment continues to grow. It is important to plan ahead and determine the withdrawal amount and duration to make the most out of your funds.

How to Use the SWP Calculator?

Using a SWP calculator online is very easy, even if you are an inexperienced person when it comes to investing. Just follow these simple steps, and you will get an idea of how your money will grow and how much you can withdraw over time.

Enter Your Investment Amount: To begin with, type in the total amount of money you plan to invest in the mutual fund.

Specify Your Withdrawal Amount and Frequency: Decide how much money you would like to withdraw and how often (monthly, quarterly, or yearly).

Provide the Investment Duration: How long do you want to keep your investments running? Is it a few years or more? Think about it and specify the total number of years or months you plan to keep the SWP active.

Enter the Expected Rate of Return: This is the estimated percentage your mutual fund is expected to generate every year. Enter the anticipated annual return percentage for your mutual fund. You can check past performance to get an idea.

Calculate the Results: Click the “Calculate” button, and the tool will show you how much money you will get, how much will be left, and how your investment will perform over time.

How Does the SWP Calculator Work?

When you make withdrawals under a SWP, your total fund size reduces. You then receive interest on the remaining balance. This process is repeated several times until the plan matures. The SWP calculator replicates this mechanism and determines returns on a different principal amount for each period. It thus estimates the impact of your withdrawals on your investment plan over time based on factors like the initial investment amount, the frequency and size of your withdrawals, and the expected return rate.

Formula to Calculate Systematic Withdrawal Plan Returns

While most people prefer to calculate their SWP returns using online calculators, it is also recommended that they be aware of the relevant formulas. These can help you understand the workings of SWP better.

A = PMT {(1+r/n)nt - 1} / (r/n)

Where,

• A = Final Value of the Investment
• PMT = Amount withdrawn per period
• r = Expected annual rate of return
• n = Number of compounding periods per year
• t = Total number of years

Here is a simple example to help you further understand this formula:

Ms. Sanya has invested ₹5 lakh in a mutual fund and plans to withdraw ₹10,000 per month for 12 months via SWP. Then, based on the SWP formula:

Example of Systematic Withdrawal Plan

Let us say you have invested ₹1,20,000 in a mutual fund scheme and opted for an SWP of ₹10,000 per month for 12 months, with a rate of return of 7%. The returns will be calculated as follows:

How Does SWP Calculator Help in Financial Planning?

A SWP helps you withdraw a fixed amount from your investment regularly while the remaining balance keeps growing. However, manually calculating how much you can withdraw each month and how long your money will last can be tricky and time-consuming.

That is where the SWP calculator India can be used. It does the math for you instantly by helping you figure out the right withdrawal amount and tenure based on your financial goals. Since SWP calculators India are free to use, you can even try different combinations of withdrawal amounts and frequencies to see what works best for you. This makes financial planning much easier, ensuring you have a steady income without depleting your investments too quickly.

Benefits of SWP Calculator

With an SWP calculator, you can withdraw funds for particular reasons like children’s education, vacations, or medical expenses. This makes it easier for you financially. Thus, you get help with the following:

Easy Retirement Planning: Depending on your needs, the best SWP calculator lets you know how regularly you can withdraw money from your investment without depleting your resources. It is like crafting a set income stream for your retirement years.

Financial Forecasting: The calculator helps you understand how much money you are going to earn and lose over a span of a few years. You can experiment with how different withdrawal amounts will affect your total corpus and make better decisions about your finances as a result.

Protection Against Inflation: A SWP calculator with inflation is useful because you can use it to figure out how much money you can take out without losing value due to inflation. This means a portion of your regular income can be set to always equal its real worth, thus protecting you from an increase in living expenses.

Customized Withdrawal Strategies: Instead of the conventional life insurance or fixed-income plan, with a SWP calculator, you can choose your withdrawal amount. When you find some months bear more expenses than others or wish to receive a fixed income, you can plan accordingly.

Risk Management: The calculator helps you manage investment risks by showing potential scenarios. You can see how different withdrawal rates might impact your long-term financial health and make wiser choices.

Simple Visualization: Most SWP plan calculators provide easy-to-understand graphs and charts. This makes complex financial planning visual and comprehensible, even for those not well-versed in financial terminology.