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How to Use Systematic Withdrawal Plans After Retirement

I would like to know more about the Systematic Withdrawal Plan (SWP). I am 45 years old and have a regular income plan after age 60 through MF investment. Please suggest how to go about it.

-Vishh

A Systematic Withdrawal Plan (SWP) is a vehicle that allows an investor to withdraw funds from an existing mutual fund at predetermined intervals, e.g. monthly/quarterly/annually. To generate this cash flow, the SWP Plan converts units of the mutual fund chart into the selected time period. SWP helps investors to generate regular income from their investments. Existing investors looking for cyclical income often use SWPs to fund expenses during retirement. The good part is that returns are tax-efficient and there is no TDS on returns, unlike traditional investment options. To use this facility (SWP), one must have sufficient documents at the time of retirement. We recommend building a good corporation through regular investment (SIP) in equity-oriented mutual funds. As retirement nears, it’s a good idea to move your entire equity portfolio into debt-oriented plans. So, in retirement, you can use the SWP facility from your debt-oriented plans to cover all your day-to-day spending needs. This way, on the one hand, your capital will remain protected, and on the other hand, you can withdraw your funds at your convenience.

I want to invest Rs. 5000 each in five SIPs. Three for the long term goal i.e. planning for retirement and two for my child’s further education. I am 32 years old and have a two year old son. Please suggest some suitable mutual fund schemes.

-Name is withheld upon request

Considering your youth and long-term investment horizon, you should create an equity-oriented mutual fund portfolio. Historically, it has been seen that long-term equity is an asset class that has the potential to outperform other asset classes (Debts, Hybrids, Commodities, etc.). In the scope of equity; Large & Mid Cap, Flexi Cap, Mid Cap and Small Cap types can be considered. Rs. 5000 for each SIP in the funds namely; Can invest in ICICI Pru Large & Mid Cap Fund, Parag Parikh Flexi Cap Fund, Kotak Emerging Equity Fund, PGIM India Mid Cap Opportunity Fund and Canara Robeco Small Cap Fund. This way your portfolio will be diversified by category, geography and AMC. You should also review your portfolio at least once a year.

Questions were answered by Sanjiv Bajaj, General Chairman and CEO, Bajaj Capital.

(Send you queries and views at mintmoney@livemint.com)

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