In today’s world, passive income is the ultimate financial superpower. Whether you’re a retiree, a professional planning early retirement, or simply want your money to work for you, one tool stands out: the Systematic Withdrawal Plan (SWP).
Here’s a breakdown of how SWP can give you regular income, capital growth, and peace of mind—all at once.
1. What is Passive Income?
* Income earned without active involvement.
* Examples: Rental income, dividends, royalties, and SWP from mutual funds.
* SWP allows you to withdraw a fixed amount monthly or quarterly from mutual funds.
* Your capital stays invested and keeps growing while you receive regular income.
3. The 7% Withdrawal – 5% Growth Strategy
* Invest in a balanced mutual fund with long-term average returns of 12%.
* Withdraw 7% annually (e.g., Rs. 58,000/month from Rs. 1 crore).
* Corpus still grows at net 5% per year.
* Enjoy regular income + wealth creation.
* Withdraw: Rs. 7 lakh annually
* Expected return: 12% p.a.
* Net Growth: Rs. 5 lakh (approx.) each year even after withdrawal
5. Benefits of SWP as Passive Income
* Predictable, regular cash flow
* Continued capital appreciation
* Highly tax-efficient (especially in debt funds after indexation)
* No TDS on withdrawals unlike FDs
6. Top Myths About SWP – Busted
Myth 1: SWP will exhaust your capital quickly.
Truth: Not if done right. With a 7% withdrawal and 12% return, capital can grow.
Myth 2: It’s risky to withdraw from mutual funds.
Truth: Volatility is short-term. Good funds deliver consistent long-term returns.
Myth 3: Fixed deposits are safer and better.
Truth: FDs offer lower returns, are fully taxable, and can’t beat inflation. SWP is more efficient.
Myth 4: You need to be retired to use SWP.
Truth: Anyone seeking regular income—business owners, professionals—can use SWP.
Myth 5: SWP works only with large corpus.
Truth: Even Rs. 10–15 lakhs can generate a decent monthly income using SWP.
Myth 6: You’ll have to pay high taxes.
Truth: SWP benefits from long-term capital gains tax, often much lower than income tax slabs.
- Retirees looking for pension-like income
- Professionals planning career breaks
- Investors looking for monthly passive cash flow
8. Tips for a Successful SWP Plan
- Choose quality mutual funds with proven long-term track records.
- Stick to a withdrawal limit (not more than 7-8% annually).
- Rebalance or review annually.
- Use a good advisor to monitor performance and switch funds if needed.
Final Thought:
Passive income is not a luxury—it’s a smart plan. Whether you dream of early retirement, want a monthly income, or simply more freedom, SWP is a disciplined and powerful way to achieve it.
Note to the Reader: This article is part of Mint’s promotional consumer connect initiative and is independently created by the brand. Mint assumes no editorial responsibility for the content.
