Regular Cash Flow with SWP: A Smart Way for Worry Free Retirement
Retirement marks the beginning of your golden years—when you can finally live life on your own terms, pursuing all your dreams without the worry of financial stress.
After retirement, having a steady flow of income becomes essential to maintain peace of mind and independence. This means you’ll be able to spend quality time with your loved ones, indulge in hobbies, travel the world, and bid farewell to work life with ease.
But what happens after you’ve built your retirement corpus? How do you manage it?
In this blog we will be exploring an effective solution: Systematic Withdrawal Plan (SWP) in Hybrid Mutual Funds.
SWP allows you to withdraw a fixed amount from your mutual fund investments at regular intervals—either monthly or quarterly—giving you control over your retirement income.
Let’s dive into the benefits to understand it in more depth.
Benefits of SWP During Retirement
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Steady Source of Income
One of the major advantages of SWP is the ability to withdraw a fixed amount each month or quarter. This creates a predictable income stream that helps you manage your daily expenses and lifestyle needs. Whether it’s your grocery bills, healthcare, or leisure activities, the steady flow of income ensures you remain financially comfortable during your retirement years. However, one should note that the yearly withdrawal percentage of the corpus should not be more than 6%. (For more details please contact a mutual fund distributor.)
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Flexible Withdrawals
Another great feature of SWP is its flexibility. You can adjust the amount of your withdrawals based on your current needs and expenses. For example, if there’s a month where your expenses are higher due to a special occasion or medical need, you can increase the withdrawal. On the other hand, if you have a quieter month, you can reduce it. This adaptability makes SWP a highly beneficial option for retirement planning.
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Capital Appreciation
The beauty of SWP in hybrid mutual funds is that in the long term not only do you get the benefit of regular income but your invested corpus will also grow. As you make withdrawals, the invested amount continues to earn returns in the form of capital appreciation. This means that not only are you accessing funds for your daily expenses, but your invested corpus also grows over time, ensuring long-term financial security.
An Example of SWP in Hybrid Mutual Funds
Let’s break it down with an example. Imagine you accumulated Rs. 1 crore 20 years back through SIP. Based on your monthly expenses, you needed ₹50,000 every month for the next 20 years i.e. till today. With an SWP in hybrid mutual funds, you had been withdrawing the required amount every month, but what was interesting was that even after withdrawing 1.2 crores your corpus today would have been approximately ₹4.17 crore.
(This assumes an investment in an Equity Hybrid Fund with an average return of 11.12% p.a., based on AMFI Best Practices Guidelines Circular No. 109-A /2024-25 dated September 10, 2024 . Past performance may or may not be sustained in future and is not a guarantee of any future returns. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Conclusion
To understand more about SWP in hybrid mutual funds and how it can fit into your retirement plan, it’s best to seek guidance from a mutual fund distributor. They can assess your financial needs, risk profile, and guide you through the best options for creating a sustainable retirement income plan that’s right for you.