Advanced SWP Strategies: Use SWP Calculator to Maximise Your Income
In this article, we will discuss
- What Is a Systematic Withdrawal Plan?
- How Are SWPs Different from SIPs?
- What Is an SWP Calculator?
- Final Words
- Frequently Asked Questions
Are you looking for ways to keep your wealth growing while getting cashflows from your investments?
If yes, you can opt for a Systematic Withdrawal Plan to customise your withdrawals from mutual fund investments, while staying invested in the market. An SWP can allow you to capitalise on the surplus amount and meet other financial goals without hampering your principal investment.
If you are new to this term, then this blog is definitely for you. Keep reading to know how an SWP calculator can help you plan your withdrawals for maximum gains.
What Is a Systematic Withdrawal Plan?
A Systematic Withdrawal Plan is a facility that allows traders to withdraw a fixed amount of money from investments at regular intervals. Usually, mutual funds and ULIP schemes offer this facility to investors.
SWP strategy is a great option for those who wish to create a regular income source without disturbing their ongoing investments. If you are an investor in Unit Linked Investment Plans or mutual funds, you can use SWP strategies to focus on capital growth.
SWP is also an ideal option for retired individuals for consistent cash flow to secure their retirement. Furthermore, while opting for SWP, you can choose a withdrawal frequency at your convenience.
This will help you strategise a comprehensive plan for capital growth for the long run even without a huge surplus amount. You can choose your payout frequency to be monthly, quarterly, semi-annually or annually as per your financial goals.
Features of Systematic Withdrawal Plan
Here are some of the features of SWPs that make it an attractive option for planned withdrawals:
No Need to Time the Markets
When redeeming mutual fund units, you need to ensure to pick a time when the markets are high. Otherwise, you could end up selling your investments at a loss. With SWP, the same amount is withdrawn over a long time, which averages out any losses that may occur. Furthermore, with an SWP calculator, you can plan a withdrawal plan that doesn’t affect your finances.
Regular Source of Income
By opting for SWP, you can earn a fixed income over regular intervals over a predetermined period. Thus, SWP is among the go-to options for senior citizens to get regular income for their daily expenses while preventing their savings from being depleted.
Continuous Investment
While you are withdrawing a fixed amount through SWP, the remaining amount stays invested and earns market-linked returns. Thus unlike the premature withdrawal of FDs, you do not need to worry about an investment closing with a Systematic Withdrawal Plan. This facility lets your investments grow over time even as you get regular income from it.
Flexibility
As you opt for the SWP facility, you can choose any withdrawal frequency for your investment. This can be monthly, quarterly, annually, or semi-annually. Additionally, you can select how much amount you wish to withdraw using this facility. You can also add investments or make further withdrawals.
Types of SWP
Here are the important types of SWP plans to help you with regular income and capital growth:
Appreciation Withdrawal
This type of SWP withdrawal only focuses on redeeming the investment gains. It withdraws only the capital gains of a mutual fund and transfers them to your bank account without disturbing your principal investment.
Fixed Periodic Withdrawal
Through this SWP, you withdraw a fixed sum of money from your investment at regular intervals. This fixed amount will be deposited into your bank account on a fixed date. The SWP plan will continue over a pre decided time or till all units are redeemed.
Appreciation Plus Fixed Amount Withdrawal
This SWP procedure allows you to withdraw a fixed amount periodically combining it with capital gains.
Dividend Reinvestment Withdrawal
With this strategy, you can reinvest your dividends and choose anyone from capital appreciation or fixed amount withdrawal. This SWP method allows regular capital appreciation from your dividend gains as well.
Growth Withdrawal
You can opt for this method to withdraw only the growing amount periodically while maintaining your ongoing investment.
How Are SWPs Different from SIPs?
SIP or Systematic Investment Plan allows you to invest in a mutual fund scheme with a small amount periodically till a particular tenure. This method is suitable for investors aiming to inculcate a savings habit and earn long-term appreciation. The tax is calculated based on profits that you will earn after redeeming the plan.
Systematic Withdrawal Plan, on the other hand, is the facility that allows you to redeem your investments systematically. It allows you to withdraw a fixed amount periodically without disturbing your principal investment. This prevents your capital from being depleted even as you use it for your needs.
SWP allows you to maximise your capital by investing the surplus amount in a new investment. You can also opt for it to meet other financial obligations like payment of bills, EMI, tuition fees, etc. This facility allows you to get retirement benefits as a source of regular income.
What Is an SWP Calculator?
A SWP calculator is an online tool to help you know your fixed withdrawal amount. By calculating this beforehand, you can have a clear idea of how much amount will suffice as regular income. This will also assist you in devising the right SWP strategy keeping in mind the return rates for investments.
The manual SWP calculations can be very elaborate and complicated. To save time, you should use this calculator for instant and accurate results. You can also conduct a comparative analysis to know the right scheme and withdrawal amount for your financial goals.
To make a systematic withdrawal plan using the calculator, you need to enter a few mandatory parameters. These are total investment, withdrawal per month, investment tenure and rate of returns. This will show the amount remaining after your withdrawals.
How Does the SWP Calculator Work?
To know how this calculator works, you must have an idea regarding how SWP returns are calculated. The formula to calculate SWP is as follows.
SWP= (Investment Amount/Investment Tenure)*(1 + Expected Rate of Return)^ (-1/Withdrawal Frequency)
To clearly understand this working, let’s take you through a simple example.
Mr. Shah, a middle-aged employee of a private firm, runs his family's expenses on a low income. In due course, Mr. Shah has saved up a small part of his income in mutual funds. Now, he needs a regular source of income to focus on capital growth and thus is looking for the best SWP option.
Now, let’s assume Mr Shah invests in a ₹10,00,000 mutual fund scheme whose expected rate of return is 6% per annum. The investment tenure for Mr. Shah is 10 years and he plans to opt for a monthly withdrawal plan.
So what is the SWP amount that Mr. Shah will receive every month?
SWP= (Investment Amount/Investment Tenure)*(1 + Expected Rate of Return)^ (-1/Withdrawal Frequency)
Placing the data as per the formula above we get,
SWP= (10,00,000 / 10) * (1 + 6)^(-1/120)
SWP= ₹1,66,113
As Mr Shah plans to withdraw ₹10,000 per month through SWP, his total withdrawal value is ₹12,00,000. Furthermore, his monthly SWP amount is ₹1,66,113.
With the calculation above it is evident that manual calculation can be time-consuming and might not provide accurate results. To save time and effort and get accurate results, you should opt for online calculators like Samco’s SWP calculator. This is a free tool and can calculate your SWP instantly.
How to Use an SWP Calculator?
You can follow the quick steps below to calculate your withdrawal amounts using Systematic Withdrawal Plan calculators.
Step 1: Open the online calculator on our website.
Step 2: Type the total investment amount in the space provided. You can also drag the slider to the required amount.
Step 3: Enter your per month withdrawal amount in the given box or drag the slider to the required number.
Step 4: Type in the expected returns rate per annum as per your fund’s past performance.
Step 5: Enter the total tenure of investment or drag the slider to the required value.
Step 6: Finally, the online Systematic Withdrawal Plan calculator will instantly display your total investment amount, total withdrawal and final amount you will receive as SWP.
You can change any of the parameters above to compare the final value. This will help you conduct a comparison to decide how much amount you should withdraw every month.
Perks of Using Samco’s SWP Calculator
Take a look at the perks of choosing Samco’s SWP calculators to compute your monthly SWP.
- You do not need to be a technical expert or mathematical expert to use our Systematic Withdrawal Plan calculator. Just enter the necessary parameters and the tool will do the rest.
- Allows you to have a rough idea regarding your surplus from SWP. You can invest this amount or use it for trading to maximise your returns.
- You can choose a monthly withdrawal amount for a specific tenure which can help you meet all your expenses.
- This calculator provides accurate results instantly. It is also an online tool that you can use anytime from any device.
- You can enter infinite combinations of data to compare between SWP final values to determine the right amount for you.
Final Words
To conclude, the SWP calculator is an important tool that simplifies the investment process. It also helps the investor to make an informed decision regarding when and how much to withdraw to keep your accumulated corpus intact while maximising market gains.
Consider exploring our website and using Samco’s online calculator for instant and accurate results. You must remember that our calculator is a free tool. Therefore, you can conduct innumerable calculations without paying any fees or entering any personal data. It’s a good idea to stay away from websites that ask for your sensitive information or payments of any form.
Frequently Asked Questions
1. Can I use SWP calculators for cash flow planning?
Ans. Yes, Systematic Withdrawal Plan calculators can be of great help to plan your cash flow. With this calculator, you can compute your regular income through different investments and compare the same with your expenses for clear analysis.
2. Are SWP calculators suitable for all?
Ans. Yes, these calculators are suitable for all investors who are considering a Systematic Withdrawal Plan for capital growth or estimate their regular income and compare it with their financial goals.
3. Who can opt for SWPs?
Ans. Any individual aiming to gain regular income for a particular period with interest income can go for SWP. Senior citizens and retirees are the most eligible people to opt for SWPs for regular returns without disturbing their principal amount.
Disclaimer: INVESTMENT IN SECURITIES MARKET ARE SUBJECT TO MARKET RISKS, READ ALL THE RELATED DOCUMENTS CAREFULLY BEFORE INVESTING. The asset classes and securities quoted in the film are exemplary and are not recommendatory. SAMCO Securities Limited (Formerly known as Samruddhi Stock Brokers Limited): BSE: 935 | NSE: 12135 | MSEI- 31600 | SEBI Reg. No.: INZ000002535 | AMFI Reg. No. 120121 | Depository Participant: CDSL: IN-DP-CDSL-443-2008 CIN No.: U67120MH2004PLC146183 | SAMCO Commodities Limited (Formerly known as Samruddhi Tradecom India Limited) | MCX- 55190 | SEBI Reg. No.: INZ000013932 Registered Address: Samco Securities Limited, 1004 - A, 10th Floor, Naman Midtown - A Wing, Senapati Bapat Marg, Prabhadevi, Mumbai - 400 013, Maharashtra, India. For any complaints Email - grievances@samco.in Research Analysts -SEBI Reg.No.-INHO0O0005847