From ₹10,000 SIP to ₹1.75 Lakh Monthly Post-Retirement: Understanding the Power of SWP

A Systematic Withdrawal Plan (SWP) is a feature offered by mutual funds that allows investors to withdraw a fixed amount of money at regular intervals from their existing investment. Unlike lump sum withdrawals, an SWP provides a steady stream of income, making it a popular choice for retirees who need consistent cash flows, similar to a pension.

SIP: The First Step Towards Building Your Retirement Corpus

To make the most of SWP, the foundation lies in disciplined investing during one’s working years. A Systematic Investment Plan (SIP) helps build wealth over time by investing a fixed amount regularly in mutual funds. It not only averages out the cost through rupee cost averaging but also benefits from the power of compounding.

Let’s consider a scenario where an individual starts investing ₹10,000 every month from the age of 35 and continues this SIP till the age of 60. Assuming an annual return (CAGR) of 12%, the investment over 25 years will result in a substantial corpus.

• Total Investment: ₹30,00,000 
• Estimated Returns: ₹1,59,76,351 
• Total Corpus at Retirement: ₹1.89 crore 

Using SWP Post-Retirement for Monthly Income

Once retirement begins at age 60, the SIP corpus can be transferred to an SWP plan to start generating a regular monthly income. In this scenario, let’s assume the retiree wishes to withdraw ₹1.75 lakh per month for the next 15 years.

• SWP Amount: ₹1.75 lakh per month 
• Number of Years: 15 
• Expected Return During SWP Period: 8% per annum 

At this rate, the total withdrawn amount over 15 years would be approximately ₹3.15 crore. Interestingly, despite withdrawing such a large amount, the remaining balance after 15 years would still be around ₹15.4 lakh.

The Maths Behind It: SWP Returns and Capital Retention

Here’s how the numbers stack up:

• Initial Corpus: ₹1.89 crore 
• Total Amount Withdrawn: ₹3.15 crore 
• Total Returns Earned During SWP Period: ₹1.41 crore 
• Final Balance Remaining After 15 Years: ₹15.4 lakh 

The key takeaway here is that the investment not only provides a regular income post-retirement but also ensures that a portion of the original corpus remains intact. This offers financial flexibility for unforeseen expenses or future planning.

Why Planning Early Matters

This example illustrates the importance of starting early. A consistent SIP, even with a modest amount like ₹10,000 per month, when combined with a well-structured SWP plan, can help ensure financial stability during retirement. The earlier one starts, the better the compounding effect, resulting in a larger corpus and more income-generating potential.

Conclusion 

While this article does not offer investment advice, it demonstrates how systematic investing and planned withdrawals can work together to provide a steady income post-retirement. By understanding and utilising tools like SIP and SWP effectively, individuals can take meaningful steps toward building financial security in their golden years.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.