How a systematic withdrawal plan works
An SWP does the reverse of a SIP: you start with a corpus, withdraw a fixed amount each month, and whatever remains keeps earning. If the returns exceed the withdrawals, the balance grows despite the payouts. If not, the corpus erodes and eventually depletes.
The dividing line is simple. Monthly returns on the corpus are roughly corpus × annual rate ÷ 12. Withdraw less than that and the capital is untouched; withdraw more and you are consuming principal.
The sequence-of-returns problem
This calculator assumes a steady return. Reality does not cooperate. Withdrawing a fixed amount during a market downturn forces you to sell more units at low prices, permanently shrinking the corpus in a way an averaged projection hides.
Retirement planners often address this by holding two or three years of withdrawals in cash or short-term debt, so market falls need not be crystallised at the worst moment.
Frequently asked questions
What withdrawal rate is safe? +
The widely cited rule of thumb is around 4% of the corpus per year, adjusted for inflation. That figure comes from historical US market data and is debated; treat it as a starting point, not a guarantee.
Does the withdrawal amount rise with inflation here? +
No — this models a fixed monthly withdrawal. Real spending needs grow, so a plan that just barely survives in nominal terms will fall short in practice.