Many dream of financial freedom before the traditional retirement age of 58 or 60. With thoughtful financial planning, this dream is achievable in today’s world. One such way is using a Systematic Withdrawal Plan (SWP) through mutual funds. It’s a simple and powerful tool for monthly income, especially after building a strong investment base over the long term.
Let’s understand how a Rs. 10 lakh investment today can help you build a fund big enough to get Rs. 1 lakh per month for 20 years.
What is a SWP (Systematic Withdrawal Plan)?
A Systematic Withdrawal Plan (SWP) is a method to withdraw money from your mutual fund investment at regular intervals—mostly monthly. You give standing instructions to your mutual fund to transfer a fixed amount to your bank account every month.
Even after withdrawing, the remaining balance stays invested and earns returns. So, you benefit from compounding even while taking out money. This makes SWP an excellent strategy for retirement or extended breaks from work.
Step 1: Build the Base Fund – Start with Rs. 10 Lakh
Firstly, you need to grow your mon to get monthly income later. You can invest Rs. 10 lakh in a good equity mutual fund and stay invested for 21 years.
Many mutual funds have given annual returns of 12% or more over the long term. Based on this assumption, your Rs. 10 lakh will grow to around Rs. 1.08 crore in 21 years.
Lump Sum Investment Calculation
- Investment Amount: Rs. 10,00,000
- Duration: 21 Years
- Expected Annual Return: 12%
- Value After 21 Years: Rs. 1,08,00,000
(Source: Franklin Templeton Calculator)
Step 2: Monthly Income Plan – Start SWP from Rs. 1.08 Crore
Once your fund becomes Rs. 1.08 crore, you can start an SWP to get Rs. 1 lakh monthly. Let’s say the new return is 8% per year, which is more conservative because you might switch to hybrid or debt mutual funds to reduce risk.
You will withdraw Rs. 1 lakh monthly for 20 years, totalling Rs. 2.4 crore (Rs. 1,00,000 x 12 x 20). However, due to the remaining investment earning interest, you will still end up with Rs. 12,202 as a balance even after 20 years.
SWP Calculation Details
- SWP Start Amount: Rs. 1,08,00,000
- Duration: 20 Years
- Monthly Withdrawal: Rs. 1,00,000
- Annual Return: 8%
- Total Withdrawn in 20 Years: Rs. 1.85 crore
- Return on Investment: Rs. 77.12 lakh
- Final Balance After 20 Years: Rs. 12,202
Year-by-Year Breakdown of Income and Fund Growth
Below is the simplified summary of how your money works every year while taking Rs. 1 lakh per month:
Year Total Withdrawn Investment Return Year-End Balance
| Year | Total Withdrawn | Investment Return | Year-End Balance |
| 2025 | Rs. 12,00,000 | Rs. 30,90,432 | Rs. 1,04,20,611 |
| 2026 | Rs. 24,00,000 | Rs. 16,10,872 | Rs. 1,00,10,872 |
| 2027 | Rs. 36,00,000 | Rs. 23,68,353 | Rs. 95,68,353 |
| 2028 | Rs. 48,00,000 | Rs. 30,90,432 | Rs. 90,90,432 |
| 2029 | Rs. 60,00,000 | Rs. 37,74,278 | Rs. 85,74,278 |
| 2030 | Rs. 72,00,000 | Rs. 44,16,832 | Rs. 80,16,832 |
| 2031 | Rs. 84,00,000 | Rs. 50,14,790 | Rs. 74,14,790 |
| 2032 | Rs. 96,00,000 | Rs. 55,64,584 | Rs. 67,64,584 |
| 2033 | Rs. 1,08,00,000 | Rs. 60,62,362 | Rs. 60,62,362 |
| 2034 | Rs. 1,20,00,000 | Rs. 65,03,963 | Rs. 53,03,963 |
| 2035 | Rs. 1,32,00,000 | Rs. 68,84,891 | Rs. 44,94,891 |
| 2036 | Rs. 1,44,00,000 | Rs. 72,00,294 | Rs. 36,00,294 |
| 2037 | Rs. 1,56,00,000 | Rs. 74,44,929 | Rs. 26,44,929 |
| 2038 | Rs. 1,68,00,000 | Rs. 76,13,134 | Rs. 16,13,134 |
| 2039 | Rs. 1,80,00,000 | Rs. 76,98,796 | Rs. 4,98,796 |
| 2040 | Rs. 1,85,00,000 | Rs. 77,08,969 | Rs. 8,969 |
| 2041 | Rs. 1,85,00,000 | Rs. 77,09,686 | Rs. 9,686 |
| 2042 | Rs. 1,85,00,000 | Rs. 77,10,461 | Rs. 10,461 |
| 2043 | Rs. 1,85,00,000 | Rs. 77,11,298 | Rs. 10,461 |
| 2044 | Rs. 1,85,00,000 | Rs. 77,12,202 | Rs. 12,202 |
Why SWP is Better Than FD or Pension Plans
- Fixed Income: You get a steady amount every month.
- Flexibility: You can choose how much to withdraw and when.
- Compounding: The remaining amount continues to grow.
- Tax Benefit: Compared to FDs, capital gains on mutual funds can be more tax-friendly.
- Market-Linked Growth: Returns are better than traditional savings.
Important Note for Investors
While this looks attractive, remember that mutual funds are subject to market risks. Returns are never guaranteed. This example assumes fixed returns for simplicity, but markets go up and down in reality.
Before starting an SWP, you must build a large fund. Equity mutual funds can help in long-term growth, but they are risky. Always invest according to your goals and risk tolerance and after expert advice.
Sources: Franklin Templeton India, Financial Express
