Question 1

What is a Systematic Withdrawal Plan (SWP)?

Accepted Answer

An SWP allows you to withdraw a fixed amount regularly from your mutual fund investments. It is widely used by retirees to generate a steady monthly income from their accumulated corpus.

Question 2

How does an SWP work?

Accepted Answer

You invest a lump sum amount in a mutual fund and set up a monthly withdrawal. Every month, units worth the withdrawal amount are sold. The remaining balance continues to earn returns based on market performance.

Question 3

Can my corpus become zero?

Accepted Answer

Yes. If your withdrawal rate exceeds the return generated by the fund, your principal will slowly deplete and eventually become zero. Setting a sustainable withdrawal rate (e.g., 4% to 6% annually) is critical.

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