Dhirendra Kumar explains which is a better option to derive income post-retirement
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.