Systematic Withdrawal Plans (SWPs) are increasingly being seen as a dependable and smarter way for Indian retirees to earn regular income, according to recent financial reports and expert insights.
What Are SWPs?
An SWP lets you withdraw a fixed amount regularly-monthly, quarterly, or annually-from your mutual funds, while the rest of the investment stays invested and continues to grow.
Why Are SWPs Becoming Popular for Retirees?
- Steady Cash Flow
- SWPs offer predictable, regular payouts to help retirees cover living expenses without touching the entire corpus.
- Tax Efficiency
- Withdrawals from equity mutual funds are taxed as long‑term capital gains-with favorable rates-unlike fixed deposits that attract higher income-tax rates.
- Potential to Beat Inflation
- Since part of the investments stay in equities or balanced funds, there’s a chance of outpacing inflation over time.
- Corpus Longevity
- Experts recommend a withdrawal rate of 3-4% per year. For example, with a ₹50 lakh corpus generating an 8% return annually, one could withdraw ₹1.75 lakh to ₹2 lakh a year (~₹14,600-₹16,700 per month) and potentially sustain the corpus for over 30 years.
What Experts Are Saying
Gurmeet Chadha, Managing Partner & CIO at Complete Circle, describes SWPs as a powerful retirement income tool-perhaps even more effective than traditional SIPs or insurance bonuses-because they shift focus from saving to smart, structured withdrawals.
Many wealth planners argue that SWPs offer a tax-efficient, regular income-a superior alternative to fixed deposits for retirees.
Risks to Consider
- Market Volatility: A prolonged market downturn could erode your corpus faster than expected, making conservative withdrawal planning essential.
- Sequence of Returns Risk: Withdrawing more during market lows could deplete principal; some caution against starting SWPs without considering market cycles.
How to Set Up an SWP
- Pick the withdrawal amount and frequency that suits your lifestyle.
- Fund the plan from equity, hybrid, or balanced mutual fund schemes.
- Monitor it regularly and adjust withdrawals as needed.
- Stick to conservative withdrawal rates-3-4% per year-or even lower if markets are volatile.
A Fresh Retirement Approach
SWPs are now trending as a structured, flexible, and tax-smart option for retirees in India. They offer regular income but also preserve portfolio growth-making them a compelling alternative to traditional fixed-income products.
