Systematic Withdrawal Plan (SWP) Calculator

What is a SWP Calculator?

SWP stands for systematic withdrawal plan. If you invest a lump-sum amount in a mutual fund and you want to withdraw a certain amount regularly, then you can do the same with the help of SWP. And to calculate the total withdrawable amount, the final amount, and the amount invested, we use the SWP calculator.

SYSTEMATIC WITHDRAWAL PLAN (SWP):

What is SWP?

SWP stands for "Systematic Withdrawal Plan." SWP is a method of regularly withdrawing money from an existing mutual fund at fixed intervals. (1 month, 3 months) (6 months, 1 year)

How does SWP work?

Choose an existing mutual fund scheme where you have already invested your money or invest a lump sum amount in a mutual fund scheme. Now you need to specify two things before investing in SWP:

• the withdrawal amount
• withdrawal frequency (1 month, 3 months, 6 months, 1 year)

Features of SWP

• Provides regular income to investors from their investments.
• Investors can choose the withdrawal amount and withdrawal frequency.
• Option to withdraw only the appreciated amount so that the capital amount remains invested and you can get a fixed income every month, and the original amount will still be invested and you will earn returns.
• There is no TDS (tax deducted at source) deducted for the withdrawn amount.

Drawbacks of SWP

• The SWP option has market-related risks.
• SWP means taking money from a mutual fund. So the STCG tax or LTCG may be applicable as per the specific scenarios.
• Exit load fees might be charged by some mutual fund houses on every withdrawal.

Withdrawal Frequency

You can opt for one of the following withdrawal modes to withdraw through SWP (it can be selected during the start of the plan and can be modified in the middle as well).

• Monthly
• Quarterly
• Yearly

Withdrawal Methods

• withdraw a fixed amount.
• withdraw the appreciated amount only.

How does the SWP calculator work?

This is how the SWP calculator works:

Input Values:

You have to provide the following details, like:

• Lump sum amount: The total amount that you have invested in a mutual fund
• Withdrawal per month: The total amount that you want to withdraw from the mutual fund every month
• Expected Interest Rate: Enter the interest rate that you think your mutual fund will yield.
• Time period: Enter the total duration for which you want to withdraw monthly from mutual funds.

Output Values:

The calculator provides the following calculations:

• Total Investment: This shows the total amount you will have invested in SWP.
• Total Withdrawal: This shows the total amount that you have withdrawn from the mutual fund.
• Final Value: This shows the total amount that you have left after the withdrawal (if it's negative or zero, that means your entire investment amount has been withdrawn).

How SWP is Calculated?

Lets understand how SWP is calculated with the help of this chart

Assumptions

• Lump sum amount: Rs. 10,00,000
• Withdrawal per month: Rs.10,000
• Expected Interest Rate: 10%
• Time period: 1 year

Month	Balance at the beginning	Withdrawal per month	Interest Earned
1	10,00,000	10,000	8,250
2	9,98,250	10,000	8,235
3	9,96,485	10,000	8,221
4	9,94,706	10,000	8,206
5	9,92,912	10,000	8,191
6	9,91,103	10,000	8,176
7	9,89,279	10,000	8,161
8	9,87,439	10,000	8,145
9	9,85,585	10,000	8,130
10	9,83,715	10,000	8,114
11	9,81,829	10,000	8,099
12	9,79,928	10,000	8,083
Final Remaining Value: 9,78,010

Advantages of Using a SWP Calculator

• The SWF calculator offers several advantages for potential investors, making it a valuable tool for informed financial
• It helps estimate potential returns. Knowing all the details that are necessary for SWP investment helps us calculate the potential returns. This is what an SWP calculator does.
• It also helps us to calculate what amount needs to be invested in order to get a particular amount every month and for how many months.
• Helps to Compare Investments: You can experiment with different annual investment amounts to see how they impact your personal finances. By using the calculator, it will help you optimize your investment strategy within the SWP that will suit you the best.
• It is easily accessible from your browser, and it is very easy to use.

Steps to use the SWP Calculator?

Using the SWP is a straightforward process. Here's a breakdown of the typical steps involved:

1. Input Lump Sum Amount (Total Investment): Enter the total amount that you would like to invest in a SWP.
2. Input withdrawals per month: Enter the total amount that you would like to withdraw per month.
3. Input Expected Return Rate: Enter the expected return for a specific mutual fund that you are thinking about investing in.
4. Input the time period (in years): Enter the duration for which you want to withdraw money monthly.
5. Click on the Calculate button.

Output: The calculator will display the following results:

• Total Investment: This shows the total amount you will have invested in SWP.
• Total Withdrawal: This shows the total amount that you have withdrawn from the mutual fund.
• Final Value: This shows the total amount that you have left after the withdrawal (if it's negative or zero, that means your entire investment amount has been withdrawn).

Common Mistakes to Avoid While Using the SWP Calculator?

To ensure the accuracy of your calculations, avoid these common pitfalls :-

• Inaccurate Values: Double-check that you're entering the correct investment amount and interest rate.

Conclusion

In conclusion, a systematic withdrawal plan (SWP) helps to generate a fixed regular income from your mutual fund investments. It's particularly useful for people who have a lot of lump-sum cash and want to invest it and also earn a regular income (for example, retirements), and SWP helps you achieve that. To calculate your SWP, the SWP calculator is used.