SWP Calculator

Your Trusted Partner in Financial Planning

What is the SWP Calculator Formula?

The SWP (Systematic Withdrawal Plan) calculator uses a simple yet powerful formula to estimate your monthly withdrawals while maintaining a balance in your mutual fund investments. Below is a step-by-step explanation of the formula along with an example.

Step 1: Calculate the Monthly Interest Rate

The first step is to convert the annual return percentage into a monthly interest rate. This is done using the following formula:

Monthly Interest Rate = Annual Return (%) ÷ (100 × 12)

Example: If the annual return is 8%, the monthly interest rate is:

Monthly Interest Rate = 8 ÷ (100 × 12) = 0.0066667 (or 0.66667%)

Step 2: Perform Monthly Calculations

For each month, two key steps are performed:

  1. Withdrawal: Subtract the monthly withdrawal amount from the current corpus.

    Remaining Corpus After Withdrawal = Current Corpus - Monthly Withdrawal

  2. Apply Interest: Apply the monthly interest rate to the remaining corpus.

    New Corpus = Remaining Corpus After Withdrawal × (1 + Monthly Interest Rate)

Full Formula for Each Month

Combining both steps, the formula for updating the corpus at the end of each month is:

New Corpus = (Current Corpus - Monthly Withdrawal) × (1 + Monthly Interest Rate)

Example Calculation

Let’s apply this formula step-by-step for the first two months with the following inputs:

  • Initial Investment: ₹5,00,000
  • Monthly Withdrawal: ₹10,000
  • Annual Return: 8%
  • Tenure: 5 years (60 months)

Month 1

  • Starting Balance: ₹5,00,000
  • Withdrawal: Remaining Corpus After Withdrawal = ₹5,00,000 - ₹10,000 = ₹4,90,000
  • Interest Earned: ₹4,90,000 × (8 ÷ (100 × 12)) = ₹4,90,000 × 0.0066667 = ₹3,266.67
  • Ending Balance: New Corpus = ₹4,90,000 + ₹3,266.67 = ₹4,93,266.67

Month 2

  • Starting Balance: ₹4,93,266.67
  • Withdrawal: Remaining Corpus After Withdrawal = ₹4,93,266.67 - ₹10,000 = ₹4,83,266.67
  • Interest Earned: ₹4,83,266.67 × (8 ÷ (100 × 12)) = ₹4,83,266.67 × 0.0066667 = ₹3,221.78
  • Ending Balance: New Corpus = ₹4,83,266.67 + ₹3,221.78 = ₹4,86,488.45

Final Output

After repeating this process for all 60 months, the final corpus will be approximately ₹5,218. This means your investment has grown despite regular withdrawals!

Why Use the SWP Calculator Formula?

The SWP calculator formula helps you:

  • Plan your monthly withdrawals effectively.
  • Understand how your investment grows over time.
  • Make informed decisions about your financial goals.