Systematic Withdrawal Plan (SWP) Formula

Finance Formula • Published on July 30, 2026 • Last updated July 30, 2026

Mathematical Equation

$$V_{t+1} = (V_t - W) \times (1 + r)$$

Variable Definitions

V_t

Portfolio balance at start of month t

W

Fixed monthly withdrawal payout amount

r

Monthly portfolio growth rate (Annual Expected Return / 12 / 100)

Detailed Explanation

In-Depth Guide

A Systematic Withdrawal Plan (SWP) allows mutual fund investors to redeem a fixed amount regularly while remaining capital continues earning market returns.

How to Calculate: Step-by-Step

1. Subtract monthly payout amount W from opening portfolio balance. 2. Apply monthly compound interest rate r to remaining balance. 3. Repeat month by month across investment tenure to calculate remaining capital.

Worked Calculation Example

Corpus $100,000, Withdraw $800/month at 8% annual return: - Month 1: ($100,000 - $800) × 1.00667 = $99,862.33.

Common Use Cases

  • Post-retirement regular pension income
  • Dividend substitute planning
  • Capital preservation

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