What is the SWP Calculator?
A systematic withdrawal plan runs a SIP in reverse. Instead of adding a fixed amount every month, you take one out, and whatever stays invested keeps working. It is the mechanism most people actually need after they finish accumulating, and it is far less discussed than the accumulation phase.
The question a SWP answers is not "how much have I got" but "how long will it last". That depends on three things pulling against each other: the size of the corpus, the size of the withdrawal, and the return the remainder earns. This calculator shows which one wins over your chosen period.
What each input means
- Starting corpus
- The amount invested on day one, before any withdrawal.
- Monthly withdrawal
- The fixed sum you take out each month. Held constant here, which understates the real problem — see the note on inflation below.
- Expected annual return
- What the remaining balance earns. For a withdrawal plan this should be a conservative figure, not an optimistic one.
- Withdrawal period
- How long you want the plan to run. If the corpus empties sooner, the calculator says when.
How this calculation works
Each month the balance earns one month of return, then the withdrawal is taken out of the total. What remains carries into the next month. The final withdrawal is capped at whatever is actually left, so the balance never goes negative.
The result hinges on whether the return on the corpus is larger or smaller than what you are removing. Draw less than the corpus earns and the balance grows despite the withdrawals. Draw more and it declines, slowly at first and then sharply, because every rupee withdrawn is also a rupee that stops earning.
That acceleration is the part people underestimate. A plan that looks stable for twelve years can empty in the following four, because the shrinking balance earns less and less while the withdrawal stays the same size.
Formula: Balance = (previous balance x (1 + r)) - withdrawal, each month
Getting the most out of the result
- Run the calculation at a return two or three percentage points below what you expect. A withdrawal plan that only survives at optimistic returns is not a plan.
- Check the year the balance stops growing. That turning point matters more than the closing figure, because it is when the plan starts consuming itself.
- The withdrawal here stays flat. Real spending does not, so raise the withdrawal figure by your assumed inflation and re-run it to see the honest version.
- Sequence matters in a way this model cannot show: poor returns in the early years do far more damage than the same poor returns later, because the withdrawals compound the loss.
- Keep one to two years of withdrawals in something stable outside the corpus, so a bad year does not force you to sell at the worst moment.
Common mistakes to avoid
The most common mistake is choosing the withdrawal amount by what is needed rather than what is sustainable, and only discovering the gap years in. Close behind is assuming a long-run average return will arrive smoothly, when the order of good and bad years changes the outcome substantially for a portfolio being drawn down. Treating the projected closing balance as a promise rather than one path among many is the third. And forgetting that a flat withdrawal loses purchasing power every year makes a plan look far more comfortable on paper than it will feel in year fifteen.
Frequently asked questions
What is a systematic withdrawal plan?
It is an arrangement where you withdraw a fixed amount from an investment at regular intervals while the balance stays invested. It is the mirror image of a SIP, and is typically used to turn a built-up corpus into a regular income.
How long will my corpus last?
That depends entirely on whether the withdrawal is larger or smaller than the return the corpus earns. If you withdraw less than it earns, it lasts indefinitely and grows. If you withdraw more, the calculator shows the month it empties.
What withdrawal rate is safe?
There is no single safe figure, and anyone who quotes one without conditions is oversimplifying. The rate that works depends on your time horizon, the volatility of what you hold, and how much flexibility you have to cut spending in a bad year. Model several rates rather than trusting one.
Does this account for inflation?
No. The withdrawal amount stays constant throughout, so the projection shows the same rupee figure being taken each month. Because prices rise, that amount buys less every year. To model it honestly, increase the withdrawal figure and re-run the calculation.
What happens if returns are worse than expected?
The corpus depletes faster than shown, and the effect is not proportional. A plan that survives twenty years at nine percent may not survive fifteen at six, because each shortfall reduces the base that generates future returns.
Is a SWP better than taking dividends or interest?
They solve the same problem differently. Interest and dividends pay out what the investment generates; a SWP pays out an amount you choose, taking from capital when the returns fall short. The SWP gives a predictable amount and an unpredictable endpoint; income payouts do the reverse.
Can I change the withdrawal amount later?
In practice yes, and the ability to do so is one of the strongest protections a withdrawal plan has. Reducing withdrawals during a poor stretch preserves the capital that has to recover. This calculator models a fixed amount, so re-run it whenever the real figure changes.