SWP calculator – The best way to set financial goals

All of us have heard of systematic investment plans or SIPs and we know that it is an excellent way to build financial discipline and freedom, especially over the longer term. But have you heard of SWPs or systematic withdrawal plans? Using an SWP calculator, you can start your investment planning in an optimal way and ensure a steady and tax efficient source of monthly income. If you are curious about SWP and SWP calculators, here is a primer on everything you need to know. 

What is Systematic Withdrawal Plan?

SWPs are similar to SIP investments in their form and function, with the difference being that SIPs are a way of investing in mutual funds while SWP allows you to invest a lumpsum amount and then withdraw the money in instalments. Using SWPs, you can withdraw a pre-decided amount of money from your existing mutual funds and this can be done at a pre-decided interval. This interval can be based on your financial requirements, and you can choose from options such as weekly, monthly, quarterly, semi-annual or annual intervals, making it a convenient form of ensuring a stable source of income. SWP is an excellent option for investors who are keen on saving money during the first step of their financial journey, and then using these savings to generate a regular income in the next step, instead of withdrawing the entire amount at once. It is also a popular way to earn tax efficient returns. Let us take a look at some of the benefits of SWP as a long term investment.   

Ensuring Monthly Income with SWP

Before we head to the meaning of systematic withdrawal plan calculator and get ready to assess the benefits of using SWP in mutual fund calculator, let us consider the importance of a monthly income and how SWP in mutual fund calculator helps attain that goal. Monthly income holds immense importance in our lives as it serves as the foundation for our financial stability and overall well-being, providing us with a predictable and regular inflow of funds, allowing us to meet our daily expenses, fulfil our financial obligations, and plan for the future. It becomes especially important post retirement, and can also help ensure an early retirement, if you so desire.

With a systematic withdrawal plan calculator, you can facilitate a steady monthly income that covers essential needs such as housing, food, healthcare, education, and transportation. It provides a sense of security, reducing financial stress and uncertainty, enabling you to maintain a certain standard of living and achieve a level of financial independence. Creating a reliable monthly income through SWP mutual fund calculator can catalyse your financial planning and goal setting initiatives as it then allows you to ensure a secure future even after you retire. Let us now take a look at the other benefits of SWP.

Benefits of SWP

Opting for a systematic withdrawal plan has a variety of benefits and here are some of the major ones –

1. Tax efficiency: One of the biggest reasons why investors choose SWP is because of its tax efficient nature. After all, there is no investor who wishes to pay more tax than is strictly necessary and, using SWP, you can plug your tax outgo in an efficient manner. When you invest in different types of mutual funds, you attract different forms of tax outflows. For instance, if you are investing in equity funds for more than a year, you are exempted from short term capital gains tax. When you withdraw the money invested in such funds within a year, you attract short term capital gains of 15%, if the total income is less than 1 crore rupees. However, if you invest in debt funds, your short term capital gain, or the returns made in the three-year period, get added to your income and attract tax in line with your tax slab. Further, long term capital gains in debt funds are taxed at 20%, with indexation.

 However, if you opt for SWP, you only pay tax on the gains made due to the NAV movement. That means you do not have to pay tax on the principal amount, because you are not withdrawing it completely. You only have to pay tax on the withdrawals, which help you reduce the overall tax amount, making the option more investor friendly. If you opt for full withdrawal, the entire gain is taxed in line with your bracket, which could go up to 30%, and take away a large chunk of your returns. ​

2. Additional income: If you earn a regular income through your job or business, you know how important it is to ensure a source wherein you can receive income at fixed intervals. With SWPs, you can ensure optimal financial planning and create an additional source of income to supplement your lifestyle. This can be an excellent option for your retirement phase, or when you are planning a career gap as you will not have to remain dependent on just your savings.

 3.Meeting financial goals: Suppose you want to purchase a house 7 years down the line. You have started investing for the same but will require a loan given the inflation and rise in property prices. If you plan in advance, you can create SWPs which will help you meet the loan outflow amount, without putting a strain on your actual income. You can use SWPs to effectively meet your financial goals, be it future education or the purchase of a car or a house.

Use SWP calculator to meet financial goals

Now that you know the benefits of SWP, how do you use an SWP calculator to meet your financial goals? You can use SWP calculators to enter the amount of money you invest and then calculate the optimal amount which you can withdraw, at the most suitable intervals. This will help you decide how much you should invest in the first place, to meet your financial goals later in life, and put you on the fast track towards financial independence and fulfilment.

To sum it up, if you have been thinking of creating an additional source of regular income for the future and looking at tax-efficient ways to do the same, using an SWP calculator and creating an effective systematic withdrawal plan is the best way forward.  

An investor education initiative by Edelweiss Mutual Fund

All Mutual Fund Investors have to go through a onetime KYC process. Investor should deal only with Registered Mutual Fund (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit - https://www.edelweissmf.com/kyc-norms 

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATEDDOCUMENTS CAREFULLY