Retirement, career breaks, or a shift away from salary can change how money is used. That’s when SWP mutual funds come into focus as investments that start serving regular withdrawals and not just growth.
A Systematic Withdrawal Plan enables investors to withdraw fixed amounts from a mutual fund at chosen intervals. From retirees hoping to generate monthly income to younger investors planning cash flows, SWPs are built for different life stages. That’s why understanding how to invest in a SWP Mutual Fund could be more beneficial than most realise.
This blog explains how to invest in a SWP Mutual Fund, real use cases, and practical decisions that shape outcomes.
What is a Systematic Withdrawal Plan (SWP)?
A Systematic Withdrawal Plan (SWP) is a feature offered to investors that enables them to make regular withdrawals from a mutual fund scheme. The investors can decide both the withdrawal amount and the frequency based on their cash-flow needs. It can also be structured to withdraw only the investment gains, while keeping the original capital untouched. On the scheduled dates, the required mutual fund units are redeemed, and the amount is credited to the investor’s linked bank account.
Unlike an SIP, SWP works in the opposite direction. While SIP focuses on investing money at regular intervals, an SWP allows investors to withdraw money systematically, creating a consistent and predictable income stream.
Financial advisors recommend SWPs as a tax-efficient way to draw regular income from mutual funds, and a smarter alternative to fixed deposits. Instead of withdrawing the entire fixed deposit or retirement corpus at once and facing a higher tax outgo, investors can opt for annual withdrawals of, say, 3.5% to 4%, allowing the remaining amount to stay invested, helping the corpus sustain regular income and potentially last for over 30 years.
Step‑by‑Step Guide: How to Invest in a SWP Mutual Fund
The following points describe how to invest in a SWP mutual fund step-by-step, in a simple and practical way.
Choose the Right Mutual Fund Scheme
Investors should begin by selecting a scheme that aligns with their risk comfort and income expectations. In India, equity or hybrid funds are commonly used for SWPs, and consistency and fund quality matter more than short-term returns. For example, a balanced advantage fund instead of a highly volatile sector fund.
Make an Initial Investment (Lump Sum or SIP Corpus)
Investors first need to invest in a mutual fund scheme through an AMC website, registered mutual fund app, bank platform, or distributor, such as investing directly on an AMC portal or through platforms like Coin, Groww, or a bank relationship manager.
An SWP can be set up only after a sufficient corpus is created. This corpus may come from a lump-sum investment, retirement proceeds, or long-term SIPs, for example, gratuity money or a SIP built over 10–15 years. The size of the corpus directly affects how sustainable the withdrawals will be.
Submit the SWP Request to AMC or Platform
Investors then need to log in to the AMC website or app, open the specific mutual fund scheme, select the SWP option, enter withdrawal details, and submit the request, such as choosing a monthly withdrawal from an existing equity fund. Without this step, they won’t be able to withdraw money even if the investment exists.
Choose Withdrawal Amount & Frequency
Investors can choose the withdrawal amount and schedule based on regular income needs, for example, ₹15,000 every month to meet household expenses. Many advisors in India recommend keeping annual withdrawals within 3.5% to 4% to avoid putting pressure on the corpus.
Select Start Date & Linked Bank Account
The start date should allow a gap after the investment, such as starting withdrawals 1 year after the lump-sum investment. Investors must double-check the linked bank account, as the payouts are auto-credited, and failed transfers could delay payments.
Confirm & Monitor SWP
After SWP is in place, the investors should review it at regular intervals, say once a year or after a major market correction, to observe any changes in market conditions, expenses, or income needs that may require adjustments to ensure the plan remains effective over time.
Examples: SWP Use Cases (Retirement, Income Generation)
Let’s see how an individual can generate monthly income post-retirement, with an example!
Mr Verma retired at the age of 60 and invested ₹1 crore from his PF and gratuity into a balanced mutual fund, which is expected to generate an 8% return per annum. He plans to withdraw ₹50,000 every month for 5 years through an SWP to meet regular expenses. The following table shows how the calculations follow.
Investment return will be calculated as:
Monthly return = Investment value × (8% ÷ 12)
For example, Monthly return for the first month = 99,50,000 × (8% ÷ 12) = ₹66,333 approximately
| Month | Investment value before withdrawal (in ₹) | Monthly withdrawal (in ₹) | Investment value after withdrawal (in ₹) | Interest Earned (in ₹) |
| 1 | 1,00,00,000 | 50,000 | 99,50,000 | 66,333 |
| 2 | 1,00,16,333 | 50,000 | 99,66,333 | 66,444 |
| 3 | 1,00,32,777 | 50,000 | 99,82,777 | 66,555 |
| 4 | 1,00,49,332 | 50,000 | 99,99,332 | 66,666 |
| 5 | 1,00,65,998 | 50,000 | 1,00,15,998 | 66,773 |
And the calculation continues for the remaining years of the SWP. With a monthly withdrawal of ₹50,000, Mr Verma withdraws ₹30 lakh in 5 years. At an assumed 8% return, the remaining corpus continues to earn returns alongside withdrawals.
Conclusion
An SWP is not just about withdrawals but about control. When set up correctly, it helps the investors to turn mutual fund holdings into regular income without exiting the market completely. From retirees to non-salary or corporate professionals, SWPs offer flexibility, tax efficiency, and structure, provided that the fund choice, withdrawal rate, and review discipline are handled with care.
FAQs
An SWP, or Systematic Withdrawal Plan, is an investment method that allows the investors to withdraw a fixed amount from a mutual fund at regular intervals. The remaining investment stays invested, and units are redeemed periodically to meet the withdrawal request.
First, invest in a mutual fund and ensure the units are allotted. Then log in to the AMC or investment platform, select the scheme, choose the SWP option, enter withdrawal details, and submit the request.
Yes, most of the AMCs and investment platforms in India allow SWP setup online. As long as the KYC is completed and the bank account is linked, the entire process can be done digitally.
SWP withdrawals are taxed based on capital gains rules. Each withdrawal includes a principal and gains portion, and only the gains are taxed. Tax rates depend on the fund type and holding period.
Investors can choose monthly, quarterly, half-yearly, or annual withdrawals, depending on the AMC’s options. The monthly SWPs are the most commonly used for regular income needs.
Yes, SWPs are widely used by retirees to replace a regular income after retirement. When withdrawal rates are kept reasonable, it helps them to manage expenses while keeping the remaining corpus invested.
If all units in the mutual fund are redeemed, the SWP stops automatically, and no further withdrawals are processed. The investors may need to reassess their income plan or remaining investments.
