SWP Sustainability
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SWP (Systematic Withdrawal Plan) lets you set up automatic monthly withdrawals from your mutual fund portfolio. The specified amount is redeemed each month and credited to your bank account. Remaining corpus stays invested and continues to earn returns.

A 3–4% annual withdrawal rate (i.e., ₹3–4L/year from ₹1 Cr) is generally sustainable for 25–30 years assuming 8–10% portfolio returns. Higher withdrawal rates (5–6%) are possible for shorter retirement periods of 15–20 years.

SWP offers flexibility and retains growth potential. Annuity from insurance companies offers guaranteed income but locks in principal forever. Pension depends on the scheme. For most retirees, a hybrid approach works: annuity for 50% of basic needs (guaranteed), SWP for discretionary spending.

Conservative hybrid funds or balanced advantage funds (BAF) are ideal — they provide equity growth with automatic rebalancing and lower volatility. Avoid pure equity for SWP — market crashes in early retirement years can permanently impair the corpus (sequence of returns risk).

Inflation is the biggest risk. A fixed ₹50,000/month withdrawal in 2025 will have only ₹15,600 purchasing power in 2045 at 6% inflation. Step up your SWP by 6% annually (or annually review) to maintain purchasing power — this depletes corpus faster, requiring a larger initial corpus.

If markets crash early in your retirement while you're drawing down, the reduced corpus has less to benefit from the recovery. This is the opposite of SIP's rupee cost averaging. This is why conservative allocation in early retirement years (more debt) is recommended for SWP portfolios.