What Exactly Is SWP?
A Systematic Withdrawal Plan (SWP) is a feature offered by mutual funds that lets you withdraw a fixed sum at regular intervals — monthly, quarterly, or annually — from your invested corpus. Instead of redeeming everything at once, your fund redeems just enough units to give you the requested amount on each withdrawal date.
This is the opposite of a SIP (Systematic Investment Plan), where you invest regularly. With SWP, you create an income stream from an existing investment.
The remaining corpus continues to earn market returns between withdrawals, which means your money can last significantly longer than a simple savings account or fixed deposit — especially when returns exceed the withdrawal rate.
The Core SWP Formula
SWP does not use a single magic formula. Instead, it works through a rolling calculation that updates after every withdrawal. Here are the two building blocks:
Formula 1 — Units Redeemed Per Withdrawal
Units Redeemed = Withdrawal Amount ÷ Current NAV
On each withdrawal date, the fund house divides your requested amount by the NAV of that day to determine how many units to redeem from your holding.
Formula 2 — Remaining Corpus After Withdrawal
Remaining Corpus = (Total Units − Units Redeemed) × New NAV
After each redemption, the fund's NAV changes with the market. Your remaining corpus is simply the surviving units multiplied by the updated NAV.
Formula 3 — Corpus Duration (How Long Will It Last?)
n = log(W ÷ (W − P × r)) ÷ log(1 + r)
n = number of withdrawal periods (months)
W = withdrawal amount per period
P = initial corpus (principal)
r = periodic rate of return (annual rate ÷ 12 for monthly)
This formula tells you the maximum number of months your corpus can sustain withdrawals at the given rate. It assumes a constant rate of return, which is the same assumption our online SWP calculator uses.
Step-by-Step Manual Calculation
Let us walk through a practical example to see exactly how each withdrawal plays out month by month.
Scenario
Initial Investment
₹20,00,000
Starting NAV
₹50 per unit
Monthly Withdrawal
₹15,000
Expected Annual Return
12% p.a.
Step 1 — Calculate Initial Units
Total Units = Investment ÷ Starting NAV
= ₹20,00,000 ÷ ₹50 = 40,000 units
Step 2 — Monthly NAV Growth Rate
Monthly Rate = Annual Rate ÷ 12
= 12% ÷ 12 = 1% per month (0.01)
Step 3 — Month-by-Month Calculation
| Month | Opening NAV (₹) | Units Before | Units Redeemed | Units After | Closing Corpus (₹) |
|---|---|---|---|---|---|
| Month 1 | 50.00 | 40,000.00 | 300.00 | 39,700.00 | 19,85,000 |
| Month 2 | 50.50 | 39,700.00 | 297.03 | 39,402.97 | 19,88,500 |
| Month 3 | 51.01 | 39,402.97 | 294.07 | 39,108.90 | 19,91,765 |
| Month 4 | 51.52 | 39,108.90 | 291.15 | 38,817.75 | 19,99,282 |
Note: NAV grows by 1% each month. Units redeemed = ₹15,000 ÷ NAV of that month. Corpus = Remaining Units × NAV after growth.
Key Insight from the Table
Notice that the corpus is rising in the early months despite monthly withdrawals. This happens because the 12% annual return (1% monthly) on ₹20 lakh generates approximately ₹20,000 per month — more than the ₹15,000 being withdrawn. The corpus will peak and then slowly decline as NAV growth alone can no longer cover withdrawals. Use the SWP Calculator to project this full arc.
Applying the Duration Formula
Using the same scenario, let us find out how many months the corpus will last using the logarithmic formula:
P = ₹20,00,000 | W = ₹15,000 | r = 0.01
P × r = 20,00,000 × 0.01 = ₹20,000
W − (P × r) = 15,000 − 20,000 = −5,000
W ÷ (W − P × r) = 15,000 ÷ (−5,000) = −3
log(−3) → undefined (negative logarithm)
What Does This Mean?
When W − (P × r) is negative — meaning the monthly return exceeds the withdrawal amount — the formula produces an undefined result. This is actually good news: it means your corpus will theoretically never run out at this withdrawal rate. Your investment returns are outpacing your withdrawals indefinitely.
Now let us change the scenario to a higher withdrawal of ₹25,000 per month (more than the ₹20,000 monthly return):
P = ₹20,00,000 | W = ₹25,000 | r = 0.01
P × r = 20,00,000 × 0.01 = ₹20,000
W − (P × r) = 25,000 − 20,000 = 5,000
W ÷ (W − P × r) = 25,000 ÷ 5,000 = 5
n = log(5) ÷ log(1.01)
n = 0.69897 ÷ 0.00432 = ≈ 161 months (≈ 13.4 years)
At ₹25,000/month withdrawal from a ₹20 lakh corpus earning 12% per year, the money lasts approximately 13.4 years. You can cross-check this instantly using the SWP Calculator on our homepage.
Common Mistakes in Manual SWP Calculation
Using annual rate directly instead of monthly rate
Always divide annual return by 12 before using it in monthly SWP formulas. Using 12% directly instead of 1% will grossly overestimate corpus longevity.
Ignoring NAV fluctuation
Real NAV changes daily with the market. A manual calculation using a flat monthly growth is an approximation — actual results will differ. Use our calculator for scenario planning, not precise predictions.
Forgetting exit load and taxes
Early redemptions may attract exit loads (typically 1% for equity funds if redeemed within 1 year). Short-term capital gains tax (STCG) at 20% applies to units held under 12 months. Factor these into your net withdrawal planning. See our guide on Taxation in Mutual Funds for details.
Assuming a fixed rate of return
Equity mutual funds do not deliver steady 12% every month. Markets go through cycles. In years when returns are lower than your withdrawal rate, corpus depletes faster. This is called sequence-of-returns risk — one of the biggest SWP risks.
Manual Calculation vs Online SWP Calculator
| Purpose | Manual Calculation | Online Calculator |
|---|---|---|
| Understanding the math | Best | Limited |
| Quick scenario testing | Slow | Best |
| Multi-year projections | Tedious | Best |
| Verifying calculator output | Best | — |
| Adjusting for taxes | Possible | Best |
| Teaching / learning | Best | Good |
The two approaches complement each other. Learn the formula manually to build intuition, then use the SWP Calculator to run fast, accurate projections at scale.
Continue Learning About SWP
What is SWP in Mutual Funds?
Complete beginner's guide to Systematic Withdrawal Plans.
Benefits of Using an SWP Calculator
Why you should always model before you invest.
How Risky Is SWP?
Honest assessment of SWP risks including sequence of returns.
The 4% Rule in SWP Explained
The retirement withdrawal rule and how it applies to India.
Best Mutual Funds for SWP in 2025
Which fund categories work best for systematic withdrawals.
Taxation in Mutual Funds India
How capital gains tax affects your SWP withdrawals.
Try the SWP Calculator Now
Now that you understand the formula, put it to work. Use our free SWP Calculator to model your withdrawal plan in seconds — no spreadsheet required.
Open SWP Calculator