SWP Calculator

Systematic Withdrawal Plan: turning a corpus into monthly income

A Systematic Withdrawal Plan (SWP) lets you draw a fixed amount from an investment corpus at regular intervals, usually monthly, while the remaining balance stays invested and continues to earn returns. Retirees, inheritance recipients, and anyone sitting on a lump sum often use SWP to create predictable cash flow without liquidating everything at once.

This SWP calculator projects how long your corpus lasts at a fixed monthly withdrawal and expected annual return. It is the mirror image of systematic investing: where a SIP calculator models money flowing in each month, SWP models money flowing out. To stress-test retirement drawdowns with inflation and the 4% rule benchmark, pair this with the retirement withdrawal calculator. For savings accounts with inflation-adjusted payouts, see the savings withdrawal calculator.

How SWP balance simulation works

Each month the calculator credits interest on the opening balance at the monthly periodic rate, then subtracts your fixed withdrawal. The recurrence is:

Where $B_m$ is the balance after month $m$, $r = \frac{R}{12 \times 100}$ converts the annual return $R$ to a monthly rate, and $W$ is the fixed monthly withdrawal. Because withdrawals and compounding interact each period, the schedule is simulated month by month rather than solved with a single closed-form expression.

Worked example: first month on a $5,000,000 corpus

Suppose you start with $5,000,000, expect an 8% annual return, and withdraw $25,000 per month. The monthly rate is 8% divided by 12, or about 0.6667%. Month-one interest equals $5,000,000 times 0.6667%, which is $33,333. After the $25,000 withdrawal, the ending balance is $5,008,333. Because the annual withdrawal ($300,000) is below the expected annual return ($400,000), the corpus can keep growing even while you take income.

Worked example: when the corpus depletes

With a $500,000 corpus, 8% expected return, and $5,000 monthly withdrawals, the annual withdrawal rate is 12%, well above the 8% return. The balance shrinks each year and reaches zero after 166 months (13 years and 10 months). Total withdrawals equal $830,000, funded by the original $500,000 plus roughly $326,706 in compounded interest earned along the way.

Sustainable withdrawal rates

A common planning rule is to keep annual withdrawals near or below your expected return so the corpus does not erode. On a $1,000,000 portfolio, a 4% annual rate equals $40,000 per year or about $3,333 per month. If your withdrawal rate consistently exceeds returns, principal shrinks and the plan eventually runs out of money. Use conservative return assumptions and revisit your plan after major market moves.

SWP vs lump sum redemption

A lump sum withdrawal gives you immediate access to all capital but forfeits future compounding on the full amount. SWP spreads redemptions over time so the unwithdrawn balance keeps working. In many jurisdictions, only the gain portion of each SWP redemption is taxable, which can improve after-tax cash flow compared with selling everything upfront. The right structure depends on your income needs, tax bracket, and investment horizon.

Frequently asked questions