SWP Calculator
Calculate future value with inflation-adjusted systematic withdrawals.
SWP with Inflation: Protect Your Purchasing Power
A Systematic Withdrawal Plan (SWP) allows you to withdraw a fixed amount of money from your mutual fund investments at regular intervals. However, standard SWP calculators often overlook the silent wealth killer: Inflation. As prices rise, a fixed withdrawal of ₹10,000 today will buy significantly less in 10 years.
Why Inflation-Adjusted SWP is Critical
If your monthly expenses are ₹50,000 today, with an inflation rate of 6%, you will need approximately ₹89,500 after 10 years just to maintain the same lifestyle. This calculator helps you plan for this reality by increasing your withdrawal amount annually to match the inflation rate, ensuring your standard of living never drops.
*Fig 1. Rising Withdrawals (Red) vs Investment Balance (Green)*
How This Calculator Works
Unlike basic tools, this premium calculator performs a yearly step-up:
- Step 1: It calculates monthly returns on your remaining balance.
- Step 2: It deducts the monthly withdrawal amount.
- Step 3: At the end of every year, it increases your withdrawal amount by the specified Inflation Rate.
- Step 4: It alerts you if your investment corpus runs dry before your duration ends.
Frequently Asked Questions
No, SWP is not entirely tax-free. Each withdrawal is treated as a redemption. The principal component is not taxed, but the capital gains component is taxed according to Capital Gains Tax rules (STCG or LTCG) applicable to the specific mutual fund.
A commonly cited rule of thumb is the 4% rule, suggesting you withdraw 4% of your corpus annually. However, in India, where inflation is higher, a 6% withdrawal rate is often considered manageable if the portfolio generates 10-12% returns.
Yes, SWP is highly flexible. You can stop, pause, or modify the withdrawal amount and date at any time by instructing the Asset Management Company (AMC).
Absolutely. If you withdraw a fixed ₹20,000 for 20 years, the purchasing power of that amount in the 20th year might be equivalent to just ₹6,000 today. Adjusting for inflation ensures your lifestyle remains consistent.
Generally, Balanced Advantage Funds or Hybrid Aggressive Funds are preferred for SWP as they offer a mix of stability (debt) and growth (equity). Pure equity funds can be too volatile for regular income needs.