I am having around 20 lakhs needs monthly income by investing in swp how to go ahead I am turning 60 next month.
Ans: You have Rs. 20 lakhs and want a steady monthly income using Systematic Withdrawal Plan (SWP). Since you are turning 60 next month, your investment must be structured for stability, tax efficiency, and longevity. Let’s analyze how to plan your SWP effectively.
Key Factors to Consider Before SWP
1. Expected Monthly Income and Longevity of Funds
SWP provides a fixed monthly withdrawal from mutual funds while allowing the rest to remain invested.
If the withdrawal rate is too high, the capital may deplete quickly. If it is too low, it may not meet your expenses.
You must balance growth, stability, and withdrawal rate to ensure the corpus lasts at least 20+ years.
2. Choosing the Right Type of Funds
Equity funds have higher growth potential but also come with market volatility.
Debt funds offer stability but have lower returns.
A hybrid approach (mix of equity and debt) can provide both growth and stability.
Funds with lower volatility and tax efficiency should be preferred.
3. Taxation on SWP Withdrawals
Equity-oriented mutual funds: Long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%. Short-term gains are taxed at 20%.
Debt-oriented mutual funds: Taxed as per your income slab.
Step-by-Step Approach for SWP
Step 1: Allocate Funds Wisely
40% in Hybrid Funds: To balance growth and stability.
40% in Conservative Debt Funds: For low risk and steady income.
20% in Equity Funds: For long-term capital appreciation.
This mix ensures stability while keeping growth potential intact.
Step 2: Determine Withdrawal Rate
If you withdraw Rs. 10,000 per month, the corpus may last 25+ years with market-linked growth.
If you withdraw Rs. 15,000 per month, it may last 15-18 years.
A higher withdrawal rate shortens longevity of funds.
Step 3: Select the Right SWP Strategy
Withdraw from debt funds initially to allow equity funds to grow.
Keep one year’s expenses (Rs. 2-3 lakhs) in a liquid fund for emergency use.
Review SWP every year to adjust based on market performance and expenses.
Alternative Options for Steady Income
1. Dividend Payout from Mutual Funds
Some mutual funds offer regular dividends, but they are not guaranteed.
SWP is better than dividends as it provides controlled withdrawals.
2. Senior Citizens Savings Scheme (SCSS) and Monthly Income Schemes
SCSS offers 8-8.5% interest but has a 5-year lock-in.
Post Office Monthly Income Scheme (POMIS) gives fixed monthly income but lower returns.
These are safe but less flexible than SWP.
Final Insights
To get steady income, invest in a mix of hybrid, debt, and equity funds. Start SWP from debt funds first, then shift to equity and hybrid funds later. Withdraw at a sustainable rate to ensure funds last for 20+ years. Keep an emergency fund for safety. Avoid fixed-income schemes that limit flexibility. Review SWP yearly and adjust based on expenses.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment