SWP’ A service offered by a mutual fund that provides a specific pay-out amount to the shareholder at predetermined intervals, generally monthly, quarterly, semi-annually or annually.
SWP is a method to withdraw cash (Withdraw only when you need it the most) in an organised manner without liquidating the entire investments. You can withdraw a fixed sum or just the capital appreciation. It safeguards you from the ups and downs that a market undergoes.
When is SWP right for you?
Note- Do not opt for SWP when you have surplus cash in hand or when markets are down.
The best and favourable time to start your SWP is your retirement. To support your daily needs during retirement it becomes important for you have additional source of income because your monthly pay check ceases during retirement.
If you made systematic investments during your working years then SWP can serve as a pension.
The tenor is SWP is based on the size of the corpus and withdrawal amount. The faster the amount withdrawn, the faster is the rate of reduction of corpus. If markets are performing well you can keep milking higher amounts through SWP, if markets are low, your SWP size might shrink.
Tax and SWP
The tax on SWP is based on the type of schemes you own. The tax structure of an equity fund is different than that of a debt fund.
SWPs shall help you all the way in meeting your income needs.