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Tata Capital > Blog > Use of SWP Option for Retirees

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Use of SWP Option for Retirees

Use of SWP Option for Retirees

Retirement is a golden period, a time when you should be able to reap the benefits of your efforts over the years. Not a time when you fear for your financial stability and wonder if you can keep up your standard of living. It’s important that you take certain steps to prevent the latter.

In this regard one cannot solely rely on interest income from fixed deposit as they may not offer sufficient real returns or dividend income which are dependent on the profitability of the company. So to ensure a regular flow of money after retirement setting up a Systematic Withdrawal Plan (SWP) is an efficient way of getting regular income. This convenient facility allows you to periodically withdraw a predetermined sum of money from a mutual fund. If you’re wondering how this can help you in your retirement years, you’re in the right place.

Here, we discuss what a SWP is and how it helps retirees.

What is a SWP?

A Systematic Withdrawal Plan (SWP) is a facility that allows investors to withdraw a set sum of money from a mutual fund periodically. Investors can choose the frequency and value of the withdrawal. Not only that, but you can also choose to withdraw the profit from your investment while keeping the capital intact.

With an SWP, units from your portfolio are automatically sold, and the proceeds are transferred to your account.

Why Should Retirees Consider a SWP?

Here are some benefits of SWP for retirees:

● Gain a Regular Source of Income

With a SWP, retirees gain a source of regular income from their investments. This is especially helpful since it allows retirees to continue their way of life even after retiring from their jobs. Retirees can use the money to meet daily/monthly expenses.

● Benefit from the Flexibility

A SWP gives investors the flexibility to choose how much and how often they want to receive the withdrawal. This flexibility allows them to withdraw money as per their unique needs. Further, retirees also have the choice to discontinue a SWP should they wish to. Alternatively, they can also elect to add more investments to the fixed SWP withdrawals.

● Get Capital Appreciation

In case the SWP withdrawal rate is below the investment’s return, the investor gets some capital appreciation in the long haul. This safeguard and added perk allow retirees to stay confident that they don’t need to worry about their financials.

● Pay no TDS

The last benefit of SWP is that for resident individual investors, there is no Tax Deducted at Source (TDS). That said, Capital Gains Tax will be applicable at the time of withdrawal, and it will vary with the type of mutual fund scheme.

How Much Should You Withdraw With SWP?

The general thumb rule suggests that, you should cap a withdrawal rate of 4%per annum to help ensure you don’t deplete your corpus. The aim is that your withdrawal rate should be below the average return potential of the investment product.

Its best to seek guidance from financial consultants to gain a customised SWP unique to your needs.

To Sum Up

A SWP helps you create a steady source of income. It helps you meet your expenses comfortably after retirement while also ensuring your investments don’t get depleted. After this, all you have left to do is choose a reliable partner in your financial journey. It allows for pre-planned cash flows generated by investments as income.

For this, consider Tata Capital Wealth. We offer a wide gamut of financial services, including investment, protection and financial services that help you meet your financial goals. With us, you benefit from the Tata Group’s 150+ years of wisdom and worldliness. To learn more, visit the Tata Capital Wealth website today!

Build Your Wealth with Expert Guidance from Tata Capital!

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