What is an SWP, and when should you use it?
SWP (Systematic Withdrawal Plan) helps you withdraw money from your mutual fund in a regular and planned manner. You can choose how much money you want and how often you wish to withdraw. It is a mutual fund feature that works opposite to a SIP. While SIP helps you grow wealth by investing regularly, SWP allows you to withdraw a fixed amount from your mutual fund at regular intervals. The investor decides the withdrawal amount and frequency (monthly, quarterly, or yearly), and each withdrawal reduces the fund’s value and the number of units you hold.
Key Features of SWP
- Regular Income: A steady and predictable income is provided, unlike dividend plans, where payouts can vary.
- Flexibility: You can customize the withdrawal amount and frequency based on your needs, such as monthly expenses or periodic payments.
- Idle Funds Utilization: Ensures your investment continues growing while providing regular withdrawals, keeping your remaining funds productive.
- Tax-Friendly: Only the withdrawn amount is taxed, and by staying invested for recommended periods, you can reduce tax liabilities.
- Goal-Based Planning: Ideal for retirees needing consistent income, managing a child’s education costs, or funding lifestyle expenses during a sabbatical.
SWP is helpful in situations where you need a regular income stream. IIf you’ve retired and stopped earning a salary, you can use an SWP to generate consistent income from your investments. It’s also helpful for covering other regular expenses like education costs for your child. For those taking a career break or sabbatical, SWP can help manage living costs without depleting your savings. SWP provides a steady income, helping you meet financial needs without liquidating your entire investment.
A Systematic Withdrawal Plan (SWP) lets you withdraw fixed amounts regularly from mutual funds. It’s ideal for retirement planning or a vacation savings plan. A mutual fund distributor or Mutual Fund advisor can help you include SWPs in your goal-based investing. With support in wealth creation strategies and financial planning services, your investments stay aligned with long-term goals.
