If you are new to this, start with what an SWP is. Here we ask the next question: how long will the money last?
The smaller the share of your money you take out in the first year, the longer it is likely to last.
The same ₹50 lakh, three ways
All three examples start with ₹50 lakh, assume the money grows 8% a year, and take the money out on the last day of each month. These are examples, not forecasts.
| Monthly amount | Yearly rise | What happens |
|---|---|---|
| ₹25,000 | None | Still lasting after 20 years, with about ₹90 lakh left |
| ₹50,000 | None | Runs out after about 13 years and 5 months |
| ₹25,000 | 6% a year, with 5% growth | Runs out after about 16 years |
Why the first one lasts
₹25,000 a month is ₹3 lakh a year, which is 6% of ₹50 lakh. The money grows by more than that, so it is not being used up. After 20 years Ravi has taken out ₹60 lakh and still has more than he started with.
Why the second one runs out
₹50,000 a month is ₹6 lakh a year, which is 12% of ₹50 lakh. That is more than the money grows, so the pot gets smaller every year, and the smaller it is, the less it grows. In this example it is empty after about 13 years.
Why the third one runs out
Here the monthly amount rises 6% every year to keep up with prices, and the money grows only 5%. The amount taken out grows faster than the money does. ₹25,000 becomes ₹31,562 in year 5, ₹42,237 in year 10 and ₹56,523 in year 15. The money lasts about 16 years.
How much can you take out?
There is no single right amount. Look at the "Taken in year 1" share in the calculator, then try a few amounts and a lower return, and see how long your money lasts. If the market falls in the first few years while you are taking money out, your money can run out sooner than a steady return shows, so a cautious case is worth checking.
What to remember
- Take out less, raise it by less, or invest more at the start, and the money lasts longer.
- A lower return makes the money run out sooner, so try one.
- Tax, exit load and fund costs are not counted here.
Try your own numbers in the lumpsum SWP calculator.
Mutual fund investments are subject to market risks, read all scheme related documents carefully. This is a way to think, not advice. Your own situation decides.
Illustration only. Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not indicative of future returns.
Your next steps
See it with your numbers
Change one number at a time and watch what happens. It is a teaching tool, not a promise.
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Gunasekaran Mookkan
AMFI-registered Mutual Fund Distributor
ARN-311721 · Check on AMFI
Gunasekaran Mookkan is an AMFI-registered mutual fund distributor from Trichy, trading as mugrow. Clients work with Gunasekaran to turn goals like education, marriage and retirement into simple monthly SIPs, with every cost and risk explained in plain words.
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