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Top 5 SWP Funds for Senior Citizens

05 November 20246 mins read by Angel One
Senior citizens can get Rs 1 lakh monthly for 80 years with SWP. Here are the top five schemes which can help you to achieve your Rs 1 lakh monthly pension.
Top 5 SWP Funds for Senior Citizens
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Retirement is a significant life transition, especially when it comes to financial planning. For many senior citizens, ensuring a steady income post-retirement is essential for a comfortable lifestyle. This is where the Systematic Withdrawal Plan (SWP) in mutual funds can play a pivotal role. An SWP allows retirees to receive a fixed monthly income while potentially preserving their principal investment. Let’s dive deeper into how SWP can be a reliable source of income, what makes it beneficial for seniors, and why it could be a preferable choice over other income options.

What is SWP? Simplifying the Basics

An SWP, or Systematic Withdrawal Plan, is a mutual fund feature that enables investors to withdraw a fixed amount regularly from their mutual fund investments. Unlike the Systematic Investment Plan (SIP), which is about investing in small chunks regularly, SWP works in reverse, allowing investors to redeem their investments periodically.

For senior citizens, SWP can be a lifesaver by offering a steady cash flow, similar to a pension. This approach is especially useful for retirees who rely on this income to cover monthly expenses without worrying about the market’s volatility.

Benefits of SWP for Senior Citizens

  1. Monthly Income Security: SWP can ensure a predetermined monthly income, which is crucial for managing household expenses and unexpected costs during retirement.
  2. Potential Tax Benefits: For seniors, tax efficiency is crucial. SWP allows for systematic redemptions, meaning only the capital gains portion of each withdrawal is taxed, not the principal.
  3. Flexibility and Control: Unlike fixed deposits or annuity plans, SWP offers greater flexibility, allowing the withdrawal amount to be adjusted as per the retiree’s needs.
  4. Capital Preservation Potential: With proper planning, an SWP can offer 100% money back over time, allowing retirees to sustain a reliable income stream without depleting the initial investment.

How to Achieve Rs 1 Lakh Per Month with SWP: 

For a senior citizen aiming to receive Rs 1 lakh per month over 20 years, with the possibility of getting back the entire investment, selecting the right fund is key. This means choosing a fund that offers a steady rate of return — typically, a balanced or hybrid mutual fund fits the bill. These funds are designed to manage risks while striving for moderate growth, making them suitable for ensuring a stable income during retirement.

Here’s how it could work:

  1. Determine the Initial Investment: For example, an investment of Rs 1.2 crore with an annual return of around 7-8% might help achieve this goal.
  2. Monthly Withdrawal Plan: With an SWP, Rs 1 lakh can be set as the monthly withdrawal amount. This steady withdrawal ensures that the senior receives a consistent income while potentially preserving the principal.
  3. Monitoring the Fund Performance: It’s essential to review the fund’s performance periodically to ensure it aligns with the income goals. Adjustments to the withdrawal amount may be needed to sustain the desired cash flow.

Here are the Top 5 SWP Funds for Senior Citizens

Scheme Name Current NAV in Rs (as of Nov 04, 2024) AUM (Rs in Crore)  TER (%) 1 Year Returns (%) 5 Years Returns (%)
HDFC Balanced Advantage Fund 499.93 96,535.50 1.35 30.74 19.95
Baroda BNP Paribas Balanced Advantage Fund 23.14 4,186.97 1.89 24.57 15.78
Edelweiss Balanced Advantage Fund 49.24 12,689.91 1.64 22.9 14.86
Sundaram Balanced Advantage Fund 34.12 1,591.20 2.04 20.45 13.68
Tata Balanced Advantage Fund 19.92 10,453 1.67 19.16 13.2

 

Note: The above-mentioned funds are from Dynamic Asset Allocation. These are a type of balanced fund or hybrid fund. Most of the funds in this category are invested and spread across various sectors, including equity funds, real estate, stocks, and bonds.

Why SWP is a Better Choice Than Fixed Deposits for Senior Citizens 

For decades, Fixed Deposits (FDs) have been the go-to investment for retirees. However, with declining interest rates, they may no longer be sufficient for inflation-adjusted income. SWPs, on the other hand, can potentially offer higher returns with flexibility in managing withdrawals. Moreover, since only the gains are taxed, SWPs are often more tax-efficient than FDs, making them a preferred choice for retirees looking to maximize post-tax income.

Key Considerations for Senior Citizens Opting for SWP

  1. Choosing the Right Fund: Equity mutual funds can be volatile, so a balanced or conservative hybrid fund may be more suitable for seniors relying on this income for stability.
  2. Setting the Withdrawal Amount: The withdrawal amount should be calculated based on anticipated returns and longevity to ensure it does not deplete the investment prematurely.
  3. Monitoring Expenses and Adjustments: While SWP is a set-and-forget solution, retirees should periodically assess their expenses and fund performance to make necessary adjustments.

Conclusion: A Thoughtful Income Strategy for Peaceful Retirement

SWPs can be a reliable income solution for senior citizens, providing them with financial independence during retirement. The ability to withdraw a fixed amount each month, coupled with tax efficiency and potential capital preservation, makes SWP an ideal choice for those looking to maintain their lifestyle post-retirement.

 Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

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