SWP (Systematic Withdrawal Plan) Calculator with Inflation Rate: This SWP calculator helps you understand how to execute an SWP investment and withdraw money monthly. Your invested money will also be safe. It will also show you inflation’s impact on the purchasing power of your withdrawals.
What is SWP (Systematic Withdrawal Plan)?
SWP means Systematic Withdrawal Plan, this is a part of a mutual fund that is a financial plan that allows individuals to withdraw a fixed amount regularly from their investment. It is often used strategically to generate a steady income, similar to a pension plan. This is particularly useful for someone who wants a constant income stream without liquidating their total investment. and it can be tax-efficient depending on the type of fund and how long it’s held.
When an SWP investor redeems a fixed amount from their entire investment. Then mutual fund companies sell some NAVs of investors based on the redeeming amount and market price of the NAV. SWP Plan could not be beneficial for each investor. This plan can be chosen for people who want a constant income like retirees or pensioners. while keeping the rest of their investment growing in the market as well.
Note: If you Invest a lump sum amount in the SWP plan it can reduce the value of your investment amount over time, especially if the market is underperforming.
Calculate your SIP future value: SIP CALCULATOR
How does this work?
The SWP (Systematic Withdrawal Plan) Calculator with inflation impact uses the following formulas to calculate the total withdrawals, remaining amount, and inflation impact.
Monthly Interest Formula:
The monthly interest is calculated using the annual interest rate, which is converted into a monthly rate.
This monthly rate is applied to the remaining investment amount at the beginning of each month to simulate growth due to interest.
Inflation Adjustment Formula:
Inflation reduces the value of the remaining investment over time. The annual inflation rate is also converted into a monthly rate, which is then used to reduce the investment value each month.
This inflation adjustment is subtracted from the remaining amount each month, simulating the diminishing purchasing power of the remaining investment.
Monthly Withdrawal Formula:
Each month, a fixed amount (monthly withdrawal) is taken from the remaining investment:
Remaining Amount After Withdrawal=Remaining Amount−Monthly Withdral
Remaining Amount Formula:
New Remaining Amount=(Previous Remaining Amount×(1+Monthly Rate))−(Previous Remaining Amount×Inflation Rate/12)−Monthly Withdrawal
Total Withdrawals:
The total withdrawals are the cumulative sum of all withdrawals made each month.
If there is not enough remaining investment for a full withdrawal in a given month, only the remaining amount is withdrawn.
Impact of Inflation:
The total impact of inflation over the entire investment duration is the sum of all monthly inflation adjustments.
Final Remaining Amount:
Final Remaining Amount=Remaining Amount After All Withdrawals and Inflation
Calculation Steps
- Step 1: Calculate the interest earned by applying the monthly interest rate.
- Step 2: Adjust the remaining investment for inflation using the monthly inflation rate.
- Step 3: Subtract the fixed monthly withdrawal from the remaining investment.
- Step 4: Update the remaining investment based on these calculations.
How to use the SWP calculator with inflation?
This calculator is easy to use just follow these simple steps and calculate your entire SWP Investment Journey. adjust investment as per your need withdrawal amount and how many years you want to withdraw from this fund, adjust current inflation, and get your result. So let’s know about it.
- First of all, you need a large amount to invest in SWP if you want to withdraw a fixed amount monthly. So adjust or type the initial amount you want to invest in lumpsum.
- Select the monthly withdrawal amount that you want consistently.
- Adjust the annual interest rate basis of SWP funds.
- Adjust your Investment/Withdrawal Period.
- And adjust the current inflation rate.
- You can see your Investment history with subtracted inflation from the remaining amounts.
Benefits of SWP calculator
Here are some key benefits of the SWP plan.
- Steady Income: Provides a predictable income from investments who want consistent income.
- Customizable Withdrawals: Allows users to adjust withdrawal amounts and frequencies.
- Tax Efficiency: Helps minimize tax by calculating capital gains versus principal.
- Inflation Adjustment: You should ensure your withdrawal keeps pace with the current inflation rate.
- Longevity Planning: It helps determine how long the investment will last with inflation.
- Optimal Strategy: You can maximize your returns.
- Financial Planning: Assists with budgeting and long-term planning.
- Lump-Sum Comparison: Compares systematic withdrawals with lump-sum strategies.
- Disciplined Investing: Encourages rational, consistent decisions to invest.
- Capital Preservation: Helps preserve principal while withdrawing income at the end.
Frequently Asked Questions:
What is the 4% rule of SWP?
This SWP 4% rule shows, how much you should withdraw from your mutual fund corpus in the first year of redemption.
What is the annual return rate of SWP?
It could be 12% to 15% as per market performance.
What is the difference between SWP and SIP?
SWP means (Systematic withdrawal plan) you can withdraw a fixed amount regularly and, You will also get returns on the rest of the amount. and SIP means (Systematic investment plan) you can start investment consistently with a small amount but can’t withdraw like SWP.
Summary:
This SWP calculator is developed to calculate your estimated SWP investment. It will help you to get a rough idea of your SWP investment plan. This calculator tool helps those investors who want to know about their SWP investment how much amount they can withdraw monthly and how much balance they will get. So I hope you will like it.
So, If you have any questions related to this SWP calculator give me your feedback in the comment box.