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SWP Calculator

Systematic Withdrawal Plan Calculator ( SWP ) Calculator

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Home / Life Insurance / Calculators / Articles / Systematic Withdrawal Plan Calculator ( SWP ) Calculator

SWP (Systematic Withdrawal Plan) Calculator (Calculator table)  
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If you're looking to build wealth and achieve your financial goals, investing in mutual funds has become increasingly popular. One investment strategy that has gained considerable attention is the Systematic Withdrawal Plan (SWP). In this comprehensive guide, we will explore the concept of SWP in India, its benefits, important factors to consider, and how you can use an efficient SWP calculator to calculate your withdrawals. Whether you're an experienced investor or new to the world of investments, this guide will equip you with the necessary insights to make well-informed decisions regarding your SWP investments. 

What is SWP?
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Investing in mutual funds has become increasingly popular if you're looking to build wealth and achieve your financial goals. One investment strategy that has gained considerable attention is the Systematic Withdrawal Plan (SWP). Systematic Withdrawal Plan is a nifty investment feature offered by mutual funds that lets you regularly withdraw a fixed amount or a certain number of units from your mutual fund investments. The advantage of SWP is that it allows you to create a regular income stream while keeping your principal amount intact. It gives you the flexibility to choose the frequency of your withdrawals, whether monthly, quarterly, semi-annually, or annually. This makes SWP particularly attractive for those seeking a steady income from their investments while still having the potential for capital appreciation. 

In this comprehensive guide, you’ll explore the concept of SWP in India, its benefits, essential factors to consider, and how to use an efficient SWP calculator to calculate your withdrawals. Whether you're an experienced investor or new to the world of investments, read on to equip yourself with the necessary insights to make well-informed decisions regarding your SWP investments. 

Types of Withdrawals Under SWP
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Here are the types of withdrawals under SWP.

  1. Fixed Amount Withdrawal: Choose a specific amount to withdraw at regular intervals.

  2. Capital Appreciation Withdrawal: Withdraw only the investment gains, preserving the principal.

  3. Appreciation plus Fixed Amount Withdrawal: Combine a fixed withdrawal amount with capital appreciation.

  4. Growth Withdrawal: Withdraw only the growth portion while keeping the principal invested.

  5. Dividend Reinvestment Withdrawal: Reinvest dividends and choose to withdraw capital appreciation or a fixed amount.

What is the SWP Calculator?
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An SWP calculator is a tool designed to assist investors in calculating the amount they can withdraw from their mutual fund investments through a Systematic Withdrawal Plan (SWP). 

How to Use a SWP Calculator in India?
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Using a SWP calculator India is straightforward and user-friendly. Follow the steps below to calculate the SWP amount using an SWP calculator.

Step 1: Select the Mutual Fund Scheme

Choose the mutual fund scheme from which you wish to initiate the SWP plans. Ensure the scheme aligns with your investment goals and risk tolerance.

Step 2: Enter the Investment Amount

Input the total amount you have invested in the mutual fund scheme.

Step 3: Set the Withdrawal Frequency

Select the desired withdrawal frequency for the SWP. This could be monthly, quarterly, semi-annually, or annually.

Step 4: Specify the Investment Tenure

Enter the intended investment tenure or the duration you plan to execute the SWP scheme.

Step 5: Provide the Expected Return Rate

Input the expected rate of return from the mutual fund scheme. This can be based on historical data or the fund manager's guidance.

Step 6: Calculate the SWP Amount

Click the "Calculate" button to generate the SWP amount based on the provided inputs.

To further enhance your financial planning, if you're also considering integrating a SIP with your SWP, this combination can provide greater flexibility by aligning your investments and withdrawals.  Understanding how SWP works with SWP can help you make better decisions and achieve your financial goals more effectively.

How Can the SWP Calculator Benefit You?
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Here is how the SWP plan calculator can prove to be helpful.

You can also explore an SWP return calculator to track your investment's growth or check the SWP interest rate to better understand potential returns. Using the best SWP calculator ensures that you get accurate and effective results. 

SWP Formula
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The formula for calculating the SWP amount can be derived using the following steps.

Step 1: Determine the Investment Amount

This refers to the total amount invested in the mutual fund scheme.

Step 2: Identify the Withdrawal Frequency

Choose the desired frequency at which you want to withdraw funds, such as monthly, quarterly, semi-annually, or annually.

Step 3: Specify the Investment Tenure

This is the duration over which you plan to execute the SWP.

Step 4: Determine the Expected Rate of Return

Input the anticipated rate of return from the mutual fund scheme, considering historical data or the guidance provided by the fund manager.

Based on these variables, the formula for calculating the SWP amount is as follows:

SWP Amount = (Investment Amount / Investment Tenure) * (1 + Expected Rate of Return)^(-1/Withdrawal Frequency)

Using this formula, you can easily calculate the SWP amount that can be withdrawn from your mutual fund investment regularly. However, to simplify the calculation process, it is recommended to use an SWP calculator, as it automates these calculations and provides accurate results with just a few inputs.

Real-Life Example: How Mr. Patel Used a SWP for Financial Stability
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Meet Mr Patel, a middle-aged individual with a low income. Over the years, he has diligently saved some of his earnings and decided to invest in mutual funds to grow his wealth. However, he also needed a regular income to support his day-to-day expenses. This is where SWPs came to his rescue.

Assuming that Mr Patel invested ₹10,00,000 in a mutual fund scheme with an expected rate of return of 8% annually. He decides to set up a monthly SWP to receive a fixed income from his investment. Here are the details of the investment.

Now, let's calculate the SWP amount that Mr Patel would receive each month:

SWP Amount = (Investment Amount / Investment Tenure) * (1 + Expected Rate of Return)^(-1/Withdrawal Frequency)

SWP Amount = (10,00,000 / 5) * (1 + 0.08)^(-1/12)

SWP Amount = 2,00,000 * 0.9934

SWP Amount ≈ ₹1,98,680

Based on these calculations, Mr. Patel would receive approximately ₹1,98,680 as his monthly SWP amount. This fixed income would stabilise him and help cover his regular expenses.

For 5 years, Mr. Patel would receive this consistent monthly income while the remaining portion of his mutual fund investment would continue to grow, taking advantage of the expected rate of return.

These calculations highlight how SWPs can be tailored to an individual's financial needs. In Mr Patel's case, the SWP provided him with a reliable fixed income, allowing him to manage his expenses effectively and enjoy financial stability despite his low-income source.

Note: The calculations are for illustrative purposes only and may vary based on the actual investment performance and specific mutual fund scheme chosen.

Key Differences Between SIP And SWP
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This table clearly shows how SIP and SWP serve different financial purposes, making it easier to choose the right approach based on your goals.

Criteria

SIP (Systematic Investment Plan)

SWP (Systematic Withdrawal Plan)

Purpose

A method to invest a fixed amount regularly in mutual funds.

A method to withdraw a fixed amount regularly from mutual funds.

Objective

Focused on growing your wealth over time.

Focused on providing a regular income stream from your investments.

Flow of Funds

Funds are invested into mutual funds regularly (monthly, quarterly).

Funds are withdrawn from mutual funds regularly (monthly, quarterly).

Investor Type

Suitable for long-term wealth accumulation.

Suitable for individuals looking for steady income post-retirement.

Capital Appreciation

Relies on the growth of invested capital.

Withdraws are based on both capital appreciation and principal.

Type of Returns

Returns are reinvested into the fund, compounding the investment.

Returns are partially or fully withdrawn, depending on the plan.

Flexibility

You can invest in any mutual fund scheme based on risk tolerance.

You can choose how much to withdraw based on your income needs.

Example

Invest ₹10,000 per month into a mutual fund.

Withdraw ₹10,000 per month from your mutual fund.

Investment Tenure

Long-term investment, usually 5+ years.

Typically used for medium to long-term goals (e.g., 5 years).

Risk Level

Risk depends on the mutual fund's portfolio.

Risk varies based on the mutual fund's performance and market conditions.

 

Conclusion
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A Systematic Withdrawal Plan calculator will help you accurately calculate your withdrawals while planning your finances. The same calculator can even help facilitate a monthly withdrawal plan based on your investment, duration, and the returns you expect to get. It also saves time and allows you to customise your strategy to align with your financial goals, providing realistic projections to support informed decision-making.

Frequently Asked Questions
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Here are some common questions about SWP calculators in India.

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What is the purpose of using an SWP calculator?

The purpose of using this calculator is to accurately calculate the withdrawal amount in a Systematic Withdrawal Plan (SWP). This tool simplifies the process by considering factors like investment amount, withdrawal frequency, investment tenure, and expected rate of return to provide precise calculations.

How do SWP calculators function?

These calculators operate by taking input values such as investment amount, withdrawal frequency, investment tenure, and expected rate of return, and applying specific formulas to determine the SWP amount. By automating complex calculations, these calculators generate accurate and reliable results.

Can SWP calculators assist with cash flow planning?

Yes, they play a vital role in cash flow planning. By calculating the SWP amount, investors can determine the regular income generated from their investments and align it with their monthly expenses, facilitating effective cash flow management.

Do SWP calculators consider taxes and fees in their calculations?

Some advanced SWP calculators may have features that incorporate taxes and fees into the calculations, offering a more comprehensive view of the net SWP amount after accounting for applicable charges. However, it depends on the specific capabilities of the calculator being used.

Are SWP calculators suitable for all investors?

Yes, they are suitable for all investors who are either considering or currently using the Systematic Withdrawal Plan. These calculators are particularly beneficial for individuals seeking to plan their SWP strategy, estimate regular income, and align it with their financial goals.

Can I select the withdrawal amount or is it fixed?

Yes, you have the freedom to choose the withdrawal amount based on your needs. You can opt for either an annual fixed amount or quarterly withdrawals, depending on your preference and financial requirements.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.