Systematic Withdrawal Plan (SWP) is typically an investment option that offers an investor the facility to withdraw a fixed predetermined sum from the invested sum in mutual funds at regular intervals. Though SWPs are somewhat similar to SIP’s in terms of function, it offers an investor the option of withdrawing money in a systematic way. SWPs in mutual funds happen to be among the most efficient and a tax advantageous way of earning good returns on a regular basis.

What makes SWP a good option for the retired people?

A good investment for the retired investors would be one that offers a regular income and helps to meet financial goals easily.

The following benefits make the SWP a good option for the retired people for regular cash flow:

• Tax advantage: When an investor puts money in equity mutual funds for a time span of over a year the capital gain is deemed to be long-term and is exempted from tax. The short-term capital gains on equity mutual fund withdrawals within a year are taxable at 15%. While the short-term capital gains are added to an investor’s income in case of debt schemes and are taxed according to the tax slab. The capital gains on long-term debt schemes are taxable at the rate of 20% for the investors. In SWP, investors do not have to pay taxes on their principal amount of withdrawal, instead, they have to pay taxes only on the gains they made because of the NAV movements; this lowers the incidence of tax and makes it an effective way to protect the accumulated fund for the retirees.
• Additional income:  Since the main objective of investing in SWP mutual funds is to earn a steady flow of income, it comes handy at a time when the cash flow stagnates due to retirement or financial crisis. At times like these, the income earned through SWP acts as additional income and helps tide over financial needs and crises.
• Financial Goals: When an investor builds a financial plan early in their life, it becomes easier for them to execute it. Investing in SWPs provides investors with a steady flow of money which helps them to meet their financial goals at the right time even when it is after their retirement.
• ​Regular income: Even when an investor is leading a retired life, doesn’t mean they can’t enjoy a regular flow of income. Investing a lump sum amount in SWP prior to retirement helps them to increase their earnings on capital appreciation and also helps to avail a regular flow of income long after retirement. Besides the retirees, the middle-aged people with responsibilities can avail the benefit of regular income through SWP to meet their additional financial expenses.

SWP is designed to help investors meet their financial needs even when they have lost their regular flow of income.  Thorough knowledge and guidance are crucial to select the best SWP for retirement. Consult our team of professional financial advisors to avail proper guidance on SWP investments.