What is an SWP?
An SWP, or systematic withdrawal plan, is the reverse of a SIP. Instead of putting a fixed amount into a mutual fund every month, you take a fixed amount out. You choose the amount and the date, and the fund sells just enough units to pay you. Whatever you don’t withdraw stays invested and can keep growing.
That makes an SWP a popular way to create a monthly income from savings, whether for retirement, a career break, or simply a second income alongside your salary.
How to use this SWP calculator
- Savings you start with: the amount invested when withdrawals begin.
- Monthly withdrawal: the income you’d like each month.
- Raise withdrawal every year by: to keep pace with rising prices. Set it to 0 for a fixed monthly amount.
- Return you assume: the yearly return on the money that stays invested. Drawing portfolios usually hold more debt, so many people test 7 to 9%.
- Period: how many years to show.
The calculator tells you whether your savings could last the whole period, and if not, roughly when they would run out. It also shows your withdrawal rate: your first year’s withdrawals as a percentage of your savings.
How the calculation works
Every month, the calculator grows your savings at the monthly equivalent of your assumed yearly return, then takes out your withdrawal. Once a year, it raises the withdrawal by the increase you set. It stops when your savings run out or the period ends.
A worked example
Start with ₹1 crore, assume 8% a year, and raise your withdrawal by 5% every year for 30 years:
| Monthly withdrawal to start | Withdrawal rate | What happens |
|---|---|---|
| ₹30,000 | 3.6% a year | About ₹2.92 crore left after 30 years, having taken out ₹2.39 crore |
| ₹50,000 | 6% a year | Savings run out in about 24 years |
The difference between 3.6% and 6% looks small. Over decades, it decides whether your savings keep growing or run dry.
How much should you withdraw?
The well-known “4% rule” comes from US research in the 1990s. Because India has generally seen higher inflation, many practitioners here suggest starting lower, around 3 to 3.5% a year. The idea is to take out less than your savings are likely to earn over the long run, so the rest can keep growing and your income can rise over time.
Bridgit Second Income is built on this: invest through a SIP for about 10 years, then draw about 3.5% a year through an SWP.
Managing the risks
- Market falls early on. Selling units after a fall uses up more of your savings. Keeping the next couple of years of income in steadier debt funds means withdrawals don’t have to come from equity at a bad time.
- Inflation. A fixed withdrawal buys less every year. Raising it each year protects your lifestyle, but uses up savings faster. Try both in the calculator.
- Living longer than planned. Plan for longer than you expect to need. Our retirement calculator can help with the bigger picture.
SWP vs FD interest
Interest from a fixed deposit is fully taxed at your income tax slab every year, even if you don’t withdraw it. With an SWP, only the gains part of each withdrawal may be taxed, and only when you withdraw. Your savings also stay invested in a mix that can grow. The trade-off is that SWP income isn’t guaranteed. Compare with the FD calculator.
