What is an SWP calculator?
A Systematic Withdrawal Plan (SWP) is the mirror image of SIP. You put a corpus into a mutual fund and withdraw a fixed amount every month. The remaining balance continues to earn returns. The SWP calculator estimates how long your corpus lasts, how much you withdraw in total, and what's left at the end of the horizon.
How does it work?
Each month:
- The remaining corpus earns interest at the assumed rate (converted from annual).
- You withdraw the fixed monthly amount.
- The new balance carries into next month.
The calculator iterates month-by-month and reports:
- Total withdrawal: sum of all monthly withdrawals.
- Final corpus: what's left after the horizon (could be positive if withdrawal is less than returns, negative/zero if exhausted).
- Warning flag: if the corpus runs out before the horizon ends.
Why SWP matters for retirees
SWP is the go-to income strategy for retired investors. Benefits:
- Tax-efficient. Unlike FD interest (taxed at slab rate), SWP redemptions from equity funds are taxed as capital gains. After 1 year, the first ₹1.25 L/year of LTCG is tax-free, and amounts above are taxed at 12.5%.
- Inflation-beating. Corpus remains invested in equity or hybrid funds, continuing to compound.
- Flexible. Change the withdrawal rate, stop any month, or switch funds.
How to use this calculator
- Enter your corpus – the total amount you've already accumulated.
- Enter your desired monthly withdrawal.
- Choose an expected return rate – for a retirement SWP in a hybrid or debt-heavy fund, use 7–9%. For a conservative debt SWP, use 6–7%.
- Set the horizon – how many years you want the income to last.
If the warning flag appears, the corpus doesn't last the full horizon – either increase the corpus, lower the monthly withdrawal, or shorten the horizon.
The 4% rule (and why it needs adjustment in India)
The famous US "4% rule" suggests you can withdraw 4% of your corpus annually for 30 years without running out. It's based on US inflation and market history.
For India, a safer number is 3–3.5%. Indian inflation is higher. Markets are more volatile. 4% can exhaust a corpus in a bad-sequence scenario.
Rough rule: retirement corpus should be 25–30× your annual essential expenses.
Assumptions
- Monthly compounding is approximated as annual-rate to effective monthly.
- Withdrawals happen at the end of each month.
- Real markets deliver returns in a non-linear way; the calculator assumes constant return. A period of poor returns early in retirement ("sequence-of-returns risk") can exhaust a corpus faster than the flat-rate model suggests.