The Systematic Withdrawal Plan allows an individual to invest lump sum in a mutual fund and regulate the amount that is to be withdrawn regularly as well as control the frequency at which the withdrawal takes place. The investor withdraws fixed amounts at intervals that are pre-determined. Withdrawals can be done in a monthly, quarterly, annual or bi-annual mode.
What is a SWP Calculator?
The SWP Calculator is a tool that allows individuals to view and track monthly withdrawals from their mutual fund investments. The matured sum can be found out as per the monthly withdrawals with the help of this calculator which has been simplified for every user to easily utilise. The future value of an individual’s mutual fund investments can be shown using this.
The components of an SWP Calculator include a formula box where the total amount that has been invested, the tenure of the investment, the annual rate of return that is expected and the monthly withdrawal rate is entered.
How can a SWP Calculator help you?
Investors that mainly invest in this scheme are usually senior citizens and retired people. They require a monthly financial input which is concrete in nature and this is where the SWP can provide the same pension or above the rate earned. Individuals who are also looking for a secondary source of income which is continuous also use SWP.
- Monthly returns can be ensured while returns on the investments are generated on the total investment with the help of this calculator.
- The most efficient monthly withdrawals can be pointed out from the mutual fund scheme.
- The calculator is straightforward and effortlessly easy to use for any individual who is looking to calculate their monthly income from different mutual fund investments. All that is required of them is to enter the variable inputs in and generate the output needed.
- The Systematic Withdrawal Plan surplus can be determined with the usage of this tool.
- Another advantage is that it provides a stable, fixed income and it is tax efficient as well.
- The SWP can be stopped at any time and further investments can also be added at the investor’s convenience.
- The withdrawals are effective redemptions which are not subject to tax deductible at source. Capital gains are taxed on the amount that has been withdrawn.
How do SWP Calculators work?
The main factor to note while using an SWP Calculator is to ensure that all the inputs and values that are to be entered are accurate. As long as this is taken care of, using this calculator is an uncomplicated process.
The calculator has various fields which are designated to tenure, the total amount invested, the amount of withdrawal per month and the expected return respectively. The values need to be entered accordingly.
Calculate the SWP after entering the values in order to search for a similar returns chart.
The formula which is used to calculate the SWP is,
A = PMT ((1+r/n)^nt – 1) / (r/n))
A stands for the Future Value of the Investment.
n is for the number of compounds that are within a period.
r stands for the return.
t denotes the number of periods that the money is invested in.
PMT is the amount of payment for each period.
Q1. Is the SWP Calculator easy to use?
Yes, it is quite simple to use and anybody can use it from any location to calculate the amount that is to be withdrawn monthly from the mutual fund scheme.
Q2. Can the SWP Calculator help you save taxes?
Tax benefits can be availed on long term capital gains that are over one lakh in one financial year for funds which are equity based. It is beneficial to retirees who want to earn a uniform source of income.
Q3. Is the amount of withdrawal fixed or can it be altered?
The amount that is to be withdrawn can be changed as per your preference and the only decision to be made is between quarterly withdrawals or an annual fixed amount.
Q4. How is the SWP Calculator helpful?
The withdrawals that are done per month from the SWP are shown by the calculator and the income that is expected to be generated every month can be calculated.
It is helpful in providing an estimate on the final value of the investment in place.
Q5. When should SWP be used?
According to experts and research, the most convenient time to use SWP is after retirement as it is another source of income.
Q6. Who can invest in an SWP?
Investing in an SWP is not just limited to retirees or senior citizens but for anybody looking to invest and acquire another method of gaining efficient returns. Travel needs and financial goals that are on a tight deadline can easily be achieved by the income that is gained.