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What are the nuts and bolts of planning an SWP?

Dhirendra Kumar talks about the pre-requisites of setting up an SWP

I want to start a Systematic Withdrawal Plan in order to get long term regular income after my retirement. Which category of fund should I invest in.
- R.K. Suri

The answer to this question depends on two things. First, your exact income requirement in monetary terms and second, the volume of your retirement corpus. However, a basic rule to be followed is to keep your withdrawal rate lower than the average expected return of your chosen fund. One should start with a conservative withdrawal rate of four to five per cent in the first year and gradually increase it after reviewing the portfolio. If you are an experienced investor, then you can invest in equity funds. The returns so generated will keep on adding to your capital and help you in maintaining as well as growing your retirement corpus.

Setting up an efficient SWP also depends on the negotiability of the income requirement. If you are solely dependent on this investment to provide for your retirement needs, then it becomes a non-negotiable income. In such a case you should take a more conservative stance while investing. If it is only to supplement your retirement needs then investing in an aggressive hybrid fund will do the job.

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