Systematic withdrawals, and how long a corpus lasts
How a systematic withdrawal plan pays you, why the withdrawal rate against the return decides everything, and how SWP withdrawals are taxed.
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In short
- A withdrawal the fund's return can replace lasts indefinitely: ₹30,000 a month from ₹50 lakh at 8% still leaves ₹69.63 lakh after 20 years.
- The level withdrawal that spends ₹50 lakh to exactly nothing over 20 years at 8% is ₹41,822 a month.
- Raising the withdrawal each year for inflation shortens the plan sharply, because the increases compound against you.
- The order of returns matters when money is leaving. A fall in the first years does lasting damage that the same fall later would not.
- Only the gain inside each withdrawal is taxed: 12.5% above ₹1.25 lakh a year for equity units held over a year, 20% for shorter holdings, slab rate for newer debt funds.
A systematic withdrawal plan is a SIP in reverse. Instead of buying units every month, the fund sells a fixed rupee amount of your units on a set date and pays the proceeds to your bank account. What is not sold stays invested and keeps earning.
That second half is the whole point. A lump sum drawn down from a savings account shrinks by exactly what you take out. A lump sum drawn down from an invested corpus shrinks by what you take out minus what the remainder earned, and when the earnings are large enough the corpus does not shrink at all.
How an SWP pays you
On each withdrawal date the fund divides the amount by that day's net asset value and redeems that many units. When the NAV is high, fewer units go; when it is low, more do. The rupee amount you receive is fixed; the number of units it costs is not.
This calculator models the same thing with a smooth return. Each month the balance earns a month's return — the annual rate divided by twelve, the convention the SIP calculator also uses — and the withdrawal then leaves at the end of the month. For a level withdrawal that gives the familiar closed form:
Balance after n months = P × (1 + i)ⁿ − W × [((1 + i)ⁿ − 1) ÷ i]
where P is the starting corpus, W the monthly withdrawal and i the monthly rate. The first term is what the money would grow to untouched; the second is what the withdrawals, each with its own lost growth, take away.
On ₹50 lakh at 8% with ₹30,000 a month, the first year pays out ₹3,60,000 and ends with ₹50,41,500 still invested — more than the starting ₹50 lakh, because a month's return on the balance is larger than a month's withdrawal.
The withdrawal rate decides everything
The single most useful number in an SWP is the yearly withdrawal as a share of the corpus. Put it next to the expected return and the outcome is mostly decided before any arithmetic.
| Monthly withdrawal | A year, of ₹50 lakh | Lasts (8%, 20 years) | Left at the end |
|---|---|---|---|
| ₹25,000 | 6.0% | All 20 years | ₹99,08,503 |
| ₹30,000 | 7.2% | All 20 years | ₹69,63,401 |
| ₹35,000 | 8.4% | All 20 years | ₹40,18,299 |
| ₹40,000 | 9.6% | All 20 years | ₹10,73,197 |
| ₹45,000 | 10.8% | 17 years | ₹0 |
| ₹50,000 | 12.0% | 13 years 10 months | ₹0 |
Below the return, the balance grows while it pays out. Near the return, it drifts slowly down. Well above it, the plan ends early: ₹45,000 a month runs out after 17 years, and ₹50,000 after 13 years 10 months, because a shrinking balance earns less in every month that follows.
This is why a withdrawal rate should be chosen against a conservative return rather than a hopeful one. A plan that only works at 10% is a plan that fails in any decade that delivers 7%.
The withdrawal that lasts exactly
Sometimes the aim is not to preserve the corpus but to spend it — a fixed period to fund, with nothing needed at the end. The level monthly withdrawal that runs a corpus down to exactly zero is an annuity payment:
W = P × i ÷ (1 − (1 + i)⁻ⁿ)
For a ₹50 lakh corpus:
| Return | Over 10 years | Over 20 years | Over 30 years |
|---|---|---|---|
| 6% | ₹55,510 | ₹35,822 | ₹29,978 |
| 8% | ₹60,664 | ₹41,822 | ₹36,688 |
| 10% | ₹66,075 | ₹48,251 | ₹43,879 |
Two things stand out. Doubling the period from 10 to 20 years does not halve the withdrawal, because the extra years also add more growth. And the return matters more the longer the period: the gap between 6% and 10% is modest over ten years and large over thirty.
Raising the withdrawal for inflation
A fixed ₹30,000 buys less every year. Raising the withdrawal to keep pace with prices protects what it buys, and it is what a pension would do. It also costs far more than it looks.
At 8% with ₹30,000 a month and no increase, the corpus lasts all 20 years and ends at ₹69.63 lakh. Raise the withdrawal by 5% every year and the plan runs out after 18 years 11 months. The increases compound: in year 20 the monthly withdrawal would have been ₹75,809, not ₹30,000.
The honest way to plan is to decide the increase first and then find the starting withdrawal the corpus can bear. The calculator's step-up slider is there for exactly that: try the increase you need, then bring the starting amount down until the money lasts.
Why smooth returns flatter the plan
Every figure above assumes the same return every month. Markets do not deliver that, and when money is leaving the order of good and bad years matters a great deal — a problem usually called sequence risk.
Take ₹50 lakh, withdraw ₹5 lakh at the start of each year, and apply the same ten annual returns in two orders: a 20% fall first and the strong years after it, or the same years reversed so the fall comes last. Without withdrawals the two orders end at exactly the same place, ₹94.05 lakh, because multiplication does not care about order. With withdrawals they do not:
| Order of returns | Balance after 10 years |
|---|---|
| Fall in year one | ₹14,01,569 |
| Fall in year ten | ₹27,38,467 |
The fall in year one hits the largest balance, and the withdrawals then sell units at depressed prices, locking the loss in. The same fall at the end hits a smaller balance after years of growth. Nothing about the average return differs.
The practical responses are a lower withdrawal rate, a year or two of withdrawals held in a liquid or short-duration fund so that a bad year does not force selling equity, and a willingness to take a little less in a year when the market has fallen.
How SWP withdrawals are taxed
Each withdrawal is a redemption, so it is taxed as capital gains — and only the gain inside the units sold is taxable, not the whole amount. Units are treated as sold first-in, first-out, so the earliest units, with the largest gains, go first.
For equity-oriented funds, units held for more than a year give long-term gains, taxed at 12.5% on gains above ₹1.25 lakh in a financial year; units held for a year or less give short-term gains, taxed at 20%. For debt funds bought on or after 1 April 2023, gains are taxed at your slab rate whatever the holding period.
That is a large part of the case for an SWP over interest income. An FD's interest is taxed in full at your slab rate every year. In the early years of an SWP from a well-established corpus, most of each withdrawal is your own capital coming back, and the taxable portion is small.
An SWP against FD interest
The two answer different needs. An FD pays a known rate on a known date and the capital does not move, which is worth a great deal for money that must be there next year. An SWP pays a known amount, but the value behind it moves with the market, which suits money that can sit through a fall and needs to outpace inflation over a decade or more.
Many people use both: the next two or three years of income in deposits or a liquid fund, and the rest in a hybrid or equity fund feeding them through an SWP.
What this calculator assumes
- The return is constant, applied monthly at the annual rate divided by twelve. Real returns are uneven, and the section on sequence risk shows why that matters.
- Withdrawals are taken at the end of each month. A plan paying on the first day of each month would run out a little sooner.
- A step-up raises the withdrawal once a year, from the thirteenth month onward.
- Tax, exit loads and the fund's expense ratio are not deducted; the expected return should already be net of expenses.
- When the balance cannot cover a withdrawal, the last payment takes what is left and the plan stops.