Systematic Withdrawal Plan (SWP) allows you to withdraw money from your mutual fund investment like a regular pension. So you first build a good corpus through a mutual fund SIP over a period of 25 to 30 years. After you retire, you put that money into an SWP plan and get a regular monthly income.
The Traditional Retirement Approach
When it comes to saving for one’s golden years, there are multiple options, including FDs, NPS and mutual funds. In the past, retirees used to put all their savings in bank FDs and draw interest from there every month. Fixed deposits still are popular in 2025 as conservative investors and pensioners want their money to be safe and prefer guaranteed returns over high yields. But if we compare FD returns with gold, stocks or mutual funds, the 7-8% returns in term deposits are very low.
Other options include the National Pension System (NPS) and Post Office Senior Citizen Scheme (SCSS). In the past 10 years, NPS returns (equity) have varied and remained around 10%. SCSS is currently offering 8.2% interest. Other plans like annuity plans offer lifetime returns, but the return is limited to only 6-7%.
Is There a Better Option?
So is there any way by which you can get good monthly returns along with safe investments?
Yes, there is a good option available – Systematic Withdrawal Plan (SWP), which allows you to withdraw money from your mutual fund investment like a regular pension. So you first build a good corpus through a mutual fund SIP over a period of 25 to 30 years – a period during which you work and get a fixed monthly income. After you retire, you put that money into a SWP plan and get a regular monthly income.
Investment Strategy to Achieve Rs 1 Lakh Monthly Post Retirement
Let’s suppose your age is 35 years right now and you want to retire at the age of 60 years and want a regular income of Rs 1 lakh monthly after retirement. So here’s is a mutual fund investment strategy for you. This strategy will have two parts – first 25 years of SIP investment and then the next 15 years post-retirement, withdrawing money from SWP. By doing that you can assure yourself of a regular monthly income of Rs 1 lakh till you reach the age of 75.
The important highlight of this investment strategy is that you will be able to retain some portion of the original investment, which means part of your capital is still available even when you discontinue your SWP. The SWP amount that you receive will be from your returns from the re-deployment of your SIP corpus made over 25 years.
Example Plan
Here’s an example: Let’s suppose you are 35 years old and want to retire at the age of 60. You want to start with an SIP of just Rs 5,000 and continue it for the next 25 years. From this corpus, you want to earn a monthly income of Rs 1 lakh per month post retirement – is it possible? Yes. You can earn Rs 1 lakh a month after retirement.
This plan has two parts:
- Rs 5,000 investment per month in an SIP with CAGR of 13% for the first 25 years – a corpus of Rs 1 crore
- Monthly income of Rs 1 lakh for 15 years through SWP after retirement
Step 1: Create a Fund of Rs 1 Crore Through SIP
You start a SIP of Rs 5,000 every month – in one large cap and one mid cap mutual fund. According to historical data, it is possible to get a CAGR (compound return) of about 13% in the next 25 years from these two funds.
Your total investment in 25 years will be Rs 15 lakh. On this, you will get a return of around Rs 85 lakh and your fund will reach Rs 1 crore.
Step 2: Get Rs 1 Lakh Monthly Income by Investing Rs 1 Crore in SWP
Now you invest this Rs 1 crore for 15 years in different funds (like largecap, Midcap, ELSS or large & midcap) with a good planning and start withdrawing Rs 1 lakh every month through SWP.
Suppose you get 10% average annual return on investments in the funds mentioned above (which is quite practical considering the long-term average performance of these funds).
You withdraw Rs 1 lakh every month for 15 years, i.e. you withdraw a total of Rs 1.8 crore. Even then your total fund value will be Rs 2.07 crore, out of which Rs 1.07 crore is just interest. That means, even after taking an income of Rs 1 lakh per month for 15 years, you are left with about Rs 27.5 lakh – meaning more than 25% of your principal amount is available for withdrawal as a lump sum after 15 years of SWP.
Summing Up
If you are young and start planning now, then this method can become an excellent retirement income model for you. The right combination of SIP and SWP will not only secure your retirement financially but will also make you self-reliant and stress-free.
Ready to get started?
If you want to create a comprehensive, personalized retirement investment plan, contact Wallet4Wealth today. Let our experts guide you on how to build a stress-free, self-reliant future through smart SIP and SWP strategies. Together, we’ll secure your financial independence and golden years.
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This blog is purely for educational purposes. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
