The 4% SWP Rule is a simple strategy for planning retirement income or regular cash flow from your mutual fund investments. SWP stands for Systematic Withdrawal Plan, which allows you to withdraw a fixed amount at regular intervals (monthly, quarterly, etc.) from your mutual fund scheme.
The 4% Rule suggests that you can safely withdraw 4% of your retirement corpus every year without running out of money for at least 25 to 30 years. Let’s say you have ₹1 crore invested in mutual funds. According to the 4% rule, you can withdraw ₹4 lakhs per year (or ₹33,333 per month) as SWP. This strategy assumes that the remaining amount stays invested and continues to grow over time, ideally in a mutual fund scheme that beats inflation.
While the 4% rule is a good starting point, it’s not a one-size-fits-all solution. Multiple factors unique to individuals like health expenses, personal lifestyle, age etc should be considered while planning. An experience advisor or mutual fund distributor can be quite helpful while planning.
