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Would you please tell if Systematic Withdrawal Plan (SWP) is better to derive regular income than dividends in old age?
- Jagmohan Pal
SWP is always a better and an efficient way of deriving regular income. For ease of calculation, let's assume that you have Rs 1 crore and want to derive Rs 1 lakh as monthly income. One way is that you invest in the dividend option and wait for the fund house to declare a dividend. There is a possibility that the fund company will pay a dividend as per your requirement, but there is also a possibility that it will not. The quantum and frequency will not be of your choice. So, it may not fulfil your need.
By doing SWP, you will give a standing instruction to provide Rs 1 lakh every month. As a result, the periodicity and quantum will be defined, and you will be able to bank on it. SWP is also more tax efficient.
This article was originally published on October 27, 2021.
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