Systematic Withdrawal Plan Calculator
An SWP or Systematic Withdrawal Plan is a scheme of withdrawal that allows investors to earn regular income from their mutual funds. Suppose you have invested in a mutual fund scheme. In that case, you can instruct the fund house to regain mutual fund units to provide you with either a variable or fixed Amount of money periodically, such as every year, quarter, or month. You can withdraw an amount or the capital gains incurred during the period by customizing the cash flow with the fund house.
What is the SWP?
SWP is the acronym for Systematic Withdrawal Plan, a method of periodically withdrawing money from your mutual funds. You can set a withdrawal amount or instruct the fund house to draw out the capital gains from your investment. This way, you can earn a fixed or variable income from your mutual fund investment.
How Can SWP Calculator Help You?
A Systematic Withdrawal Plan calculator eliminates the need to manually calculate the end value of your investment as long as you have chosen or want to choose the Systematic Withdrawal Plan route. Here are a few ways in which it can help:
- To fastly calculate your per month income from an investment for which you have set up SWP
- To verify the maturity amount of an investment based on the various withdrawal amounts you pick
- You can even get approximately your SWP surplus, which you can invest in another investment vehicle to maximize your potential return.
How Does Systematic Withdrawal Plan Calculator Work?
SWP calculator is an online tool that can estimate withdrawal amounts when entering your inputs. The SWP calculator shows regular cash flow with a systematic withdrawal plan. SWP calculation uses the formula:
A = PMT {(r/n + 1)^nt – 1} / (r/n))
Where,
A :Future value of an investment.
PMT : It is a payment per period in terms of finance.
r:Annual rate of return.
n:Compound numbers in a given period
t :number of periods an investment amount.
Example:
Let us understand this with an example:
Suppose you invested Rs.240000 in a scheme of mutual funds and opted for an SWP of Rs.10000 monthly for 12 months. Considering the rate of return in annual from the mutual fund to be 7%, we get the given below balance sheet:
| Investment Amount | Withdrawal Amount | Expected Return | Remaining Amount |
|---|---|---|---|
| Rs.2,40,000 | Rs.10,000 | Rs.1,283.2 | Rs2,21,283.2 |
| Rs.2,21,283.2 | Rs.10,000 | Rs.1174.14 | Rs2,02,457.4 |
| Rs.2,02,457.4 | Rs.10,000 | Rs.1064.2 | Rs1,83,521.8 |
| Rs.1,83,521.8 | Rs.10,000 | Rs.953.8 | Rs1,64,475.6 |
| Rs.1,64,475.6 | Rs.10,000 | Rs.842.6 | Rs.1,45,318.4 |
| Rs.1,45,318.4 | Rs.10,000 | Rs.731 | Rs1,26,049.4 |
| Rs.1,26,049.4 | Rs.10,000 | Rs.618.6 | Rs.1,06,668 |
| Rs.1,26,049.4 | Rs.10,000 | Rs.618.6 | Rs.1,06,668 |
| Rs.1,06,668 | Rs.10,000 | Rs.505.4 | Rs87,173.6 |
| Rs.87,173.6 | Rs.10,000 | Rs.391.8 | Rs67,565.4 |
| Rs.67,565.4 | Rs.10,000 | Rs.277.4 | Rs.47,842.8 |
| Rs.47,842.8 | Rs.10,000 | Rs.162.4 | Rs28,005.4 |
| Rs.28,005.4 | Rs.10,000 | Rs.46.6 | Rs8,052.1 |
| Rs.2,40,000 | Rs.10,000 | Rs.1,283.2 | Rs2,21,283.2 |
| Rs.2,40,000 | Rs.10,000 | Rs.1,283.2 | Rs2,21,283.2 |
Hence, your end value of an investment will be Rs8,052.1
You can also get the end Amount by using the SWP calculator
How to use SWP Calculator?
The SWP Calculator helps you to calculate the SWP mutual fund investment over a tenure. To use the SWP Calculator:
- You should fill in the full investment amount in mutual fund investment.
- Enter the withdrawal every month from the mutual fund scheme.
- You must fill in the rate of return expected.
- Then you enter the tenure of the investment in years
- The SWP Calculator will show you the total withdrawal, total interest earned, total investment, and the final value of the investment
Benefits of SWP Calculator:
Through the Systematic Withdrawal Plan, you may use the SWP Calculator to calculate the monthly income from mutual fund investments.
- You can try the SWP Calculator for various withdrawal amounts and calculate the maturity amount.
- The calculator helps you identify the perfect monthly withdrawals from the mutual fund scheme.
- The SWP Calculator helps you regulate the SWP surplus, which you may invest in additional financial instruments
Conclusion
The SWP calculator is useful for estimating regular withdrawals from an investment portfolio. It provides an estimate based on preset parameters and projections, but actual results may vary. Consulting with a financial advisor ensures the SWP aligns with an individual's financial goals and circumstances.
FAQ'S
How do you calculate SWP?
You opt for SWP and instruct your fund house to withdraw Rs10,000 on the 1st of every month, and the first withdrawal date had set on January 1, 2022. Now, let's suppose that the NAV of the fund is Rs 10. Hence, to withdraw Rs 10,000 monthly, the fund house must redeem 10000/10 = 1000 units monthly.
Is SWP good for retirement?
Once you retire, then you can start an SWP and create your pension.
Is SWP tax-free?
Here is how they are taxed: Gains on withdrawn investments within 12 months are treated as short-term capital gains and taxed at 15%. Gains on investments withdrawn after one year are treated as long-term capital gains, taxed at 10%.
How does the SWP calculator work?
The SWP (Systematic Withdrawal Plan) calculator estimates the regular withdrawals from an investment portfolio based on set parameters.
Can I stop SWP for a few months?
Flexibility: In an SWP plan, the investor can choose the Amount, frequency and date according to their needs. Also, the investor can stop the SWP at any time / or can add further investments or even withdraw amounts over and above the fixed SWP withdrawals.