Worked example

Suppose you invest a ₹50,00,000 corpus and withdraw ₹30,000 every month, expecting an 8% annual return over 20 years. The monthly return rate is 8% ÷ 12 = 0.667%, so in the first month the corpus earns about ₹33,333 — more than the ₹30,000 you take out. Because the return exceeds the withdrawal, the corpus actually keeps growing: after 20 years you would have withdrawn ₹72,00,000 in total and still be left with roughly ₹69,60,000. If instead you withdrew ₹50,000 a month, the withdrawal would outpace the return and the balance would fall every month until it eventually runs out.

How a SWP works

A Systematic Withdrawal Plan (SWP) is the mirror image of a SIP: instead of adding a fixed amount each month, you withdraw a fixed amount while the rest of the money stays invested and keeps compounding. Each month the calculator grows the balance by the monthly return, then subtracts your withdrawal. The key number to watch is whether your monthly return is larger or smaller than your withdrawal. When the return is larger, the corpus is self-sustaining and can even grow; when the withdrawal is larger, you are eating into principal and the corpus has a finite life. Turning on the annual step-up raises your withdrawal each year to keep pace with inflation, which shortens how long the money lasts.

Why retirees use SWPs

SWPs are popular for retirement income because they convert a lump sum into a predictable monthly paycheck while keeping the balance invested for growth, and — in many jurisdictions — they can be more tax-efficient than taking dividends, because each withdrawal is part capital and part gain. The trade-off is sequence-of-returns risk: a market fall in the early years, combined with fixed withdrawals, can permanently shrink the corpus. Use a conservative return assumption and a step-up rate near your expected inflation to stress-test your plan.

Related calculators

Build the corpus first with the SIP & investment return calculator, check how compounding grows a lump sum with the compound interest calculator, plan the full picture with the retirement calculator, grow a target with the savings calculator, or map your monthly income against spending with the budget planner.