Last Updated:
A Rs 20,000 monthly SIP over 25 years could grow to Rs 3.8 crore. Experts explain how a 5% SWP strategy may help generate steady post-retirement income.
Built a retirement corpus? Here’s how to draw from it without running out. (Representative Image)
Retirement planning often begins with a simple question: how much is enough? For many salaried investors, the answer builds slowly – one monthly contribution at a time.
Financial planners say a steady Systematic Investment Plan (SIP), if continued over decades, can create a sizeable corpus. But the next step is where many miss out on – knowing how to draw from it without exhausting it too early.
Building Retirement Corpus: From Rs 20,000 SIP to Rs 3.8 Crore
Consider a monthly SIP of Rs 20,000 invested in equity mutual funds for 25 years. At an assumed average annual return of 12 per cent, the total investment of Rs 60 lakh could grow to roughly Rs 3.8 crore over that period. That is the accumulation phase.
A Zeebiz report cited Hemant Rustagi, CEO of Wiseinvest, who described it in simple terms. “The SIP phase focuses on building a retirement corpus through disciplined investing, largely in equity funds,” he said. The aim is long-term growth, not income. But retirement changes the objective.
Moving From SIP to SWP: The 5% Withdrawal Plan
Once income stops, the focus shifts to withdrawals. This is where a Systematic Withdrawal Plan (SWP) comes in. Instead of redeeming the entire corpus, investors withdraw a fixed amount periodically.
If a Rs 3.8 crore corpus is placed under an SWP with a 5 per cent annual withdrawal rate, that works out to about Rs 19 lakh a year. Every month, that is roughly Rs 1.58 lakh. The remaining amount stays invested.
Rustagi notes that a 4 to 6 per cent withdrawal rate is considered sustainable in many cases. “Traditional instruments like fixed deposits offer stability, but post-tax returns are often lower,” he said. “SWP allows investors to remain invested in market-linked products while drawing income.”
Can The Corpus Still Grow?
Assume the remaining corpus earns 8 per cent annually. On Rs 3.8 crore, that gives you about Rs 30.4 lakh in returns in the first year. After withdrawing Rs 19 lakh, there is still a notional surplus before tax. The idea is to offset inflation while generating income.
Market returns, of course, are not guaranteed. That is where planning matters.
The Three-Bucket Approach Explained
Vishwajeet Parashar, a mutual fund expert, advises preparing one to two years before retirement. “Do not wait until the retirement month,” he told Zee Business.
He suggests dividing funds into buckets:
- Two years’ expenses in liquid funds
- A portion in hybrid or income-oriented funds
- The balance in equity-oriented funds for growth
This reduces the need to sell equity during market downturns.
Tax Rules On SWP And Long-Term Capital Gains
In equity-oriented funds held over one year, only the gain portion of withdrawals is taxed as long-term capital gains. That makes SWP potentially more tax-efficient than lump sum redemption.
Experts caution against withdrawing the entire corpus at once. A staggered withdrawal keeps income steady and allows compounding to continue.
With longer life expectancy and rising costs, the shift from SIP to SWP is being seen less as a tactic and more as a structure. Accumulate first. Then distribute – carefully.
Click here to add News18 as your preferred news source on Google.
Delhi, India, India
February 21, 2026, 06:00 IST
Read More