SIP+SWP: This smart strategy will make you look good at sixty (60), earning a lot every month from home..

If you have money by the age of 60, consider half the battle won. A lack of funds after retirement can make life difficult. That's why everyone is advised to start planning for retirement while still employed. But simply accumulating a substantial corpus isn't enough; regular income after retirement is crucial, as it's what meets all your daily needs.

If you're worried about how you'll earn a monthly income in old age, don't worry. Just adopt the SIP+SWP strategy. This is smart financial planning that will ensure a continuous flow of income even after retirement.

First, understand what SIP and SWP are.

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SIP is an investment method in which you invest a fixed amount every month into a mutual fund. This money compounds over time to form a substantial corpus. SIP is market-linked, but its average long-term return can be around 12%.

SWP (Systematic Withdrawal Plan)
SWP works exactly the opposite. You can withdraw a fixed amount from your deposited funds every month. This amount is credited to your bank account. The income from SWP continues until the funds are depleted. The average return is estimated to be around 8%.

What is the SIP+SWP Strategy?
This strategy has two steps: first, investing through SIP while employed, and second, receiving regular income through SWP after retirement.

If a person continues SIP for 25 to 30 years, they can build a strong retirement corpus. And after retirement, they can start an SWP from the same funds so that a fixed amount continues to be deposited into their account every month.

For example, if a person makes a ₹10,000 monthly SIP for 30 years and assumes an average return of 12%, they can accumulate a corpus of over ₹3 crore by retirement. Then, by running an SWP from the same fund, it's possible to earn up to ₹1 lakh per month (based on an 8% annual return).

How to Start SIP + SWP
Start SIP from the initial years of your career.
Choose equity mutual funds for SIP to generate better long-term returns.
After retirement, stop SIP and activate SWP.
Choose debt or liquid funds for SWP to minimize risk.
To activate SWP, enter the folio number, frequency, and bank account details with the AMC.
You can choose to SWP monthly, quarterly, or annually.
What are the benefits of SWP?
Withdraw the amount as needed.
Keeping the fund in the market offers the potential for good returns.

Helps beat inflation.

It deals with market volatility gradually.

It's also tax-advantaged because only the gains portion is taxed upon each withdrawal.

Keep these precautions in mind:
Never run an SWP with an equity fund, especially when the market is falling.

Doing so will require selling more units to withdraw the required amount, and your portfolio could be depleted quickly.

Debt or hybrid funds are considered better for SWP.

Be sure to check the fund's performance and the AMC's credibility before starting an SWP.

When and how to reset an SWP

If you still have funds remaining after 15-20 years, you can extend the SWP or invest the money elsewhere. Many investors also use it as a lifetime income tool for their children or spouse.

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