Sir,What amount I should investin SWP Equity to get monthly Rs 300000. I am retired n 62 years old.Are monthly withdrawals from SWP taxable.I have another idea.If I put my monthly income from Bank FD in monthly SIP,will it be beneficial?
Ans: Given your situation, I understand the importance of securing a stable income post-retirement. First, let me commend you on your proactive approach towards financial planning at this stage of life. It's crucial to ensure that your investments align with your financial goals and risk tolerance.
For generating a monthly income of Rs 300,000 through Systematic Withdrawal Plan (SWP) in equity, it's prudent to evaluate various factors. Considering your age and risk profile, investing entirely in equity might not be advisable. While equities offer potential for growth, they also come with higher volatility.
An alternative approach would be to adopt a balanced investment strategy, allocating a portion of your portfolio to equity and the rest to less volatile instruments like debt or hybrid funds. This can help mitigate risk while aiming for consistent returns.
Regarding the taxation of SWP withdrawals, equity-oriented mutual funds held for over a year are subject to Long-Term Capital Gains Tax (LTCG) of 10% exceeding Rs 1 lakh per annum. However, withdrawals up to Rs 1 lakh are exempt from LTCG tax. For withdrawals within this limit, only Dividend Distribution Tax (DDT) is applicable.
Now, let's address your idea of investing your monthly income from Bank FD into SIPs. While SIPs offer the benefit of rupee cost averaging and disciplined investing, relying solely on them may not be optimal.
Bank FDs typically offer lower returns compared to equity investments, especially considering inflation. By diversifying your investments across different asset classes, you can potentially enhance returns and manage risk more effectively.
However, it's crucial to consult with a Certified Financial Planner (CFP) to tailor an investment strategy that aligns with your financial objectives, risk appetite, and time horizon. A CFP can help you navigate through various investment options and craft a holistic financial plan that suits your needs.
In conclusion, while SWP in equity can provide a steady income stream, it's essential to diversify your portfolio and consider taxation implications. Additionally, exploring investment avenues beyond Bank FDs can help optimize returns over the long term.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
