RETIREMENT PLANNING

RETIREMENT PLANNING

Why Do You Need Retirement Planning?

A structured  retired plan,helps you to develop a comprehensive understanding of your life goals  and also define the path  to achieve it.

Why do you need to plan your finances for retirement?

It is easy to cover your expenses as long as you are earning your monthly salary. But post retirement, you need to have enough money set aside to live the rest of your life and maintain a good lifestyle.

  1. To cover daily living expenses
  2. To cover medical expenses
  3. To fight inflation
  4. To deal with uncertainties
  5. To meet your retirement goals

Hence, it is absolutely essential to have a strong Retirement Plan that will make you aware where you stand today, and what steps you need to take to achieve this goal.

SWP (Systematic Withdrawal Plan)

Systematic Withdrawal Plan or SWP is nothing but a facility that allows an investor to withdraw a fixed amount on a specific date decided by him, from a particular mutual fund scheme. This facility is specifically beneficial for retirees who are seeking a regular source of income. SWP eliminates the need to withdraw a certain sum again and again.

Now, you might be thinking how does SWP works? It is actually quite simple, you just have to decide the amount and date on which you want to receive your money and have to give instructions to the respective AMC for initiating SWP.

An individual can park his corpus received in the form of PF, gratuity, etc. in a mutual fund scheme and can initiate SWP.

There are two withdrawal options available in SWP – Fixed Periodic withdrawal and Appreciation withdrawal.

Fixed Periodic withdrawal

In a fixed periodic withdrawal, an investor chooses a fixed amount to receive after interval specific timeframe. Mutual fund house will sell units and transfer the amount in the investor’s account.

Appreciation Withdrawal

In appreciation withdrawal, an investor chooses to withdraw only the return generated on his corpus. For example, if an investor has a corpus of Rs 1 cr in a mutual fund and the fund has given a return of 1% in last one month then he will only get Rs 1 lakh for that month. Therefore, an investor can create a perpetuity using appreciation withdrawal; however the cash flow will not be same as returns are not fixed.

HOW SWP IS BETTER THAN OTHER OPTIONS ?

  • Regular Income
  • Tax advantages
  • Best Substitute for Pension
  • Best way to meet recurring goals
  • Better Averaging
  • Consistent income