In this video, we will discuss how you can use systematic withdrawal plan or SWP from mutual funds for regular retirement income
Pensions are provided by alternatives such as life insurance companies
Also, other options such as mutual retirement plans and other retirement products such as Senior Citizens Savings Scheme
How you can use systematic withdrawal plan or SWP in a mutual fund scheme to get regular retirement income
In a systematic withdrawal plan or SWP, your investment in mutual fund scheme is regularly being sold to create a regular income flow for you
While you can do an SWP in an equity fund or a debt fund but since this regular income needs to be a stable one, SWP in a debt fund scheme is recommended
This means that debt fund units will be sold to create regular income
This means that the money to create regular income through SWP needs to be put in a debt fund
A little more than 3 years before you need the money, you invest the money in a debt fund
The SWP kicks in when you need the money
As a result, units more than 3 years old are getting sold and regular retirement income or pension is being created
Any debt fund unit which is more than 3 years old get inflation indexation benefits for its long term capital gains and it gets taxed at 20%
Had the units been less than three years, short term capital gains tax would have been imposed and the gains got added to your income
They would have been taxed according to your relevant tax rate
Regular income from SWP can supplement regular retirement income from sources such as Senior Citizens Savings Scheme
SWP becomes a good tax efficient supplement for regular retirement income