SWP (Systematic Withdrawal Plan) Calculator
Calculate how much you can withdraw monthly from your investments and how long your corpus will last.
Understanding Systematic Withdrawal Plan (SWP)
What is SWP?
A Systematic Withdrawal Plan (SWP) is a facility that allows an investor to withdraw money from an existing mutual fund at predetermined intervals (monthly, quarterly, etc.).
How SWP Works
In an SWP, you invest a lump sum amount and set up regular withdrawals. Your investment continues to earn returns based on market performance, while you receive a steady income through periodic withdrawals.
SWP Calculation Formula
Final Value = P × (1 + r/n)nt - W × [(1 + r/n)nt - 1] / (r/n)
Where:
- P: Initial principal (total investment)
- r: Annual interest rate (in decimal)
- n: Number of times interest is compounded per year (12 for monthly)
- t: Time period in years
- W: Periodic withdrawal amount
Example of Systematic Withdrawal Plan
As mentioned before, the SWP allows investors to generate both monthly revenue as well as an accumulated sum at the end of the maturity period. Here are two examples to illustrate how SWP works:
Example 1: Short-term SWP
An individual has invested Rs. 50,000 for tenure of 1 year along with a systematic withdrawal of Rs. 1,000 per month. Interest rate stands at 10%.
Final value after 1 year: Rs. 42,459
Total withdrawal: Rs. 12,000
Example 2: Long-term SWP
An individual has invested Rs. 5,00,000 for tenure of 5 years along with a systematic withdrawal of Rs. 10,000 per month. Interest rate stands at 8%.
Final value after 5 years: Rs. 5,218
Total withdrawal: Rs. 6,00,000
This example shows that with these parameters, the investment will be almost completely depleted after 5 years, having provided a regular monthly income throughout the period.
How to use SWP calculator?
The calculator is user-friendly and easy to use first time out. However, you need to ensure that all values are properly put in.
- You will find four inputs: total investment, withdrawal per month, expected return rate, and time period. Fill in the values as per your investment plan.
- The calculator will instantly show you the total withdrawal amount and the final value of your investment.