SWP Calculator
Total Amount Invested
$0
Total Withdrawal
$0
Estimated Returns
$0
Final Balance
$0
What is a Systematic Withdrawal Plan (SWP)?
A Systematic Withdrawal Plan (SWP) is a facility that allows an investor to withdraw a fixed amount of money from their investment corpus at regular intervals (usually monthly). Unlike a Lump Sum withdrawal, an SWP provides a steady stream of income while the remaining balance continues to generate returns based on the market performance or fixed rates.
How Does the SWP Calculator Work?
The calculation for SWP involves tracking the monthly growth of the principal and subtracting the monthly withdrawal. The formula used is:
Final Balance = [P(1+i)^n] – [W * (((1+i)^n – 1) / i)]
- P: Principal (Initial Investment)
- i: Periodic interest rate (Annual Rate / 12 / 100)
- n: Total number of withdrawals (Years * 12)
- W: Monthly withdrawal amount
Practical Example
Suppose you invest $1,000,000 in a fund that offers an 8% annual return. You decide to withdraw $5,000 every month for 10 years.
- Total Withdrawals over 10 years: $600,000
- Remaining Balance after 10 years: ~$963,000
- Total Growth earned during the period: ~$563,000
In this scenario, despite withdrawing $600,000, your final balance is nearly the same as your initial investment because the growth rate covered a significant portion of the withdrawals.
Benefits of Using an SWP
- Regular Income: Ideal for retirees or those needing supplementary monthly cash flow.
- Compounding Benefits: The money that remains invested continues to grow, potentially outlasting the principal if the withdrawal rate is lower than the return rate.
- Tax Efficiency: In many jurisdictions, only the capital gains portion of the withdrawal is taxed, rather than the entire amount.
- Flexibility: You can choose the amount and duration of withdrawals according to your financial goals.