After a career in banking that spanned across four decades,\nSanjay, now approaching his sixties, is contemplating retirement. Being\nfinancially savvy, the seasoned banker has parked his funds in a variety of\ninvestment options. And mutual funds contribute to a majority of his financial\ninvestment portfolio. With his post-retirement phase fast approaching, Sanjay\nrealizes that he needs a steady stream of income to make the transition to his\ngolden years easier. Also, noticing that the assets in his mutual funds are\nperforming extremely well currently, Sanjay is hesitant about withdrawing his\ninvestment entirely at such a lucrative juncture.<\/p>\n\n\n\n
So, here\u2019s what he plans to do. Instead of withdrawing his money\nentirely, at one go, Sanjay opts to withdraw his corpus systematically, over\nthe course of several months. In other words, he has decided to adopt a Systematic Withdrawal Plan\n(SWP) to support his mutual\nfund withdrawals.<\/p>\n\n\n\n
You can make use of this mutual fund withdrawal plan to support yourself\nafter retirement, like Sanjay did. Alternatively, you could also leverage an\nSWP to meet various life goals or to supplement your primary income. If you\u2019ve\nnever heard of an SWP before, getting back to the basics can help you better\nunderstand this strategy for mutual\nfund withdrawals.<\/p>\n\n\n\n
What is a Systematic Withdrawal Plan?<\/strong><\/p>\n\n\n\n A Systematic Withdrawal Plan is a disinvestment strategy that\nallows you to redeem your mutual fund units in a phased manner, as opposed to a\nlump sum sale. Effectively, you withdraw your investments and earnings in\ninstalments, thus generating a regular stream of income.<\/p>\n\n\n\n An SWP is the diametric opposite of an SIP (Systematic Investment\nPlan), wherein you invest in mutual funds in instalments. In an SIP, you move\nfunds from your savings into your preferred mutual fund scheme, while in an\nSWP, you move funds from your mutual fund investments into your savings\naccount. Just like how investing in mutual funds is easy on the Moneyfy app\nfrom Tata Capital, withdrawals are also simple and straightforward on the app.<\/p>\n\n\n\n How does this mutual fund withdrawal plan\nwork?<\/strong><\/p>\n\n\n\n To execute an SWP, you need to withdraw some part of your\ninvestment at periodic intervals. The withdrawals can be made on a monthly,\nquarterly, or annual basis, depending on whatever works best for you. When you\nwithdraw money from your mutual fund investment, you effectively need to sell\noff or redeem some of the units you hold. The number of units you need to sell\ndepends on the NAV on the date you make your withdrawal.<\/p>\n\n\n\n Making systematic withdrawals using an SWP allows you to take\nadvantage of rupee cost averaging. Let\u2019s look at an illustrative example to\nmake this clearer. Say you require Rs. 5,000 five months from now. You could\nwithdraw Rs. 1,000 systematically each month.<\/p>\n\n\n\n Additional Read<\/strong>:- What Is The Power of Compounding & How Can You Use It?<\/a><\/p>\n\n\n\n Systematic Withdrawal Plan<\/strong><\/p>\n\n\n\n So, you see how you systematically redeem a different number of\nunits each month to obtain your required cash flow? The withdrawal amount can\nbe fixed, as seen in this example, or you could only choose to withdraw the earnings\nportion, leaving your capital intact.<\/p>\n\n\n\n What is the need for a Systematic Withdrawal Plan?<\/strong><\/p>\n\n\n\n The need for an SWP varies from one investor to another. For many\npeople like Sanjay, this mutual\nfund withdrawal plan can be used to provide a regular stream of income\nfor a brief period, making the transition to retirement easier. For other\nyounger investors, an SWP could help in achieving financial goals in a timely\nmanner.<\/p>\n\n\n\n This is particularly true if you have invested in mutual funds in\norder to achieve specific objectives, such as creating a corpus for the down\npayment on your home. You could structure an SWP to meet these cash\nrequirements in a timely manner without losing the benefits of favorable market\nmovements.<\/p>\n\n\n\n Conclusion<\/strong><\/p>\n\n\n\n So, you see, SWPs can help investors at varying stages of life meet different goals. You too can set up a SWP on our investment app<\/a> to meet any immediate financial requirements, if you need to. Alternatively, you could phase out of your investment using this mutual fund withdrawal plan as you near your retirement age, like Sanjay did. <\/p>\n\n\n\n\n Month<\/strong>\n <\/td> \n Cashflow<\/strong>\n (in rupees)<\/strong>\n <\/td> \n NAV<\/strong>\n (in rupees)<\/strong>\n <\/td> \n Number of units redeemed<\/strong>\n (cashflow\/NAV)<\/strong>\n <\/td> \n Units left in the fund<\/strong>\n <\/td> \n Fund value after withdrawal<\/strong>\n (units left x NAV)<\/strong>\n (in rupees)<\/strong>\n <\/td><\/tr> \n January\n <\/td> \n 10,000\n <\/td> \n 10\n <\/td> \n Nil\n <\/td> \n 1,000\n <\/td> \n 10,000\n <\/td><\/tr> \n February\n <\/td> \n (1,000)\n <\/td> \n 13\n <\/td> \n 77 (approx.)\n <\/td> \n 923\n <\/td> \n 11,999\n <\/td><\/tr> \n March\n <\/td> \n (1,000)\n <\/td> \n 12\n <\/td> \n 83 (approx.)\n <\/td> \n 840\n <\/td> \n 10,080\n <\/td><\/tr> \n April\n <\/td> \n (1,000)\n <\/td> \n 15\n <\/td> \n 67 (approx.)\n <\/td> \n 773\n <\/td> \n 11,595\n <\/td><\/tr> \n May\n <\/td> \n (1,000)\n <\/td> \n 16\n <\/td> \n 62 (approx.)\n <\/td> \n 711\n <\/td> \n 11,376\n <\/td><\/tr> \n June\n <\/td> \n (1,000)\n <\/td> \n 15\n <\/td> \n 67 (approx.)\n <\/td> \n 644\n <\/td> \n 9,660 (approx.)\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n