SWP Explained: Turning Savings Into a Monthly Income
A Systematic Withdrawal Plan (SWP) is the reverse of a SIP. Instead of investing a fixed amount every month, you invest a lump sum once and withdraw a fixed amount every month. The money that stays invested keeps earning returns, so a well-planned SWP can provide a regular income for many years while the remaining balance continues to grow or shrink slowly.
How this SWP calculator works
Each month, the balance earns interest at your expected return (the yearly rate divided by 12), and then your withdrawal is taken out. The calculator repeats this for every month of the withdrawal period and shows:
- Total withdrawn – all the income you take out.
- Returns earned – how much your investment earned along the way.
- Final value – what's left at the end of the period.
- Money lasts – whether the balance runs out before the end.
How much monthly income can a lump sum investment give?
It depends on three things: the size of the lump sum, the return it earns, and whether you want to keep the original amount intact. For example, with 10,00,000 invested at 8% a year:
| Monthly withdrawal | What happens over 10 years |
|---|---|
| ≈ 6,667 (interest only) | Your 10,00,000 stays intact |
| 8,000 | About 7,56,000 is left after 10 years |
| 12,000 | The money lasts roughly 10 years, then runs out |
Enter your own amount, return and withdrawal in the calculator above to see your exact monthly income and how long it will last.
The interest-only rule of thumb
If you withdraw no more than the interest your investment earns each month, your original capital stays intact. The calculator shows this "interest-only" figure. Withdraw more and you start eating into the capital; withdraw less and your balance grows. Many retirees aim close to this level so their savings last indefinitely.
Planning for inflation
A fixed withdrawal buys less every year as prices rise. Use the yearly increase option to raise your withdrawal each year, for example by your expected inflation rate. This gives a more realistic picture of how long your money will last.
Common uses of SWP
- Monthly income in retirement from a lump sum or pension payout
- Paying regular expenses such as school fees or rent from savings
- Moving gradually out of an investment rather than selling it all at once
Things to keep in mind
- Market-linked investments don't return a fixed rate. Poor returns early in the plan can shorten how long the money lasts, so use a conservative return.
- Withdrawals may be taxed as capital gains depending on your country and fund type.
- Some funds charge exit loads on early withdrawals.
- Review your plan once a year and adjust the withdrawal if returns or expenses change.