A Systematic Withdrawal Plan (SWP) can help provide regular cash needs for senior citizens. However, they will have first to determine their cash requirement and then create an investment plan for the desired returns to meet their daily expenses. The process may look simple, but it may take a lot of research and weighing the pros and cons to make the plan airtight.

For example, if you have accumulated Rs 1 crore at retirement and invest in a financial instrument that gives 8 per cent annually, you will earn Rs 8 lakh yearly, or around Rs 66,000 monthly. And if your monthly expense is, say, Rs 40,000, this income should be enough for living, provided you don’t have any major debt, like a home or education loan for your children.

However, since no one can be sure of their life and emergencies may strike at the least expected moment, your annual expenditures might also fluctuate. Therefore, you must have a buffer to absorb the additional costs. Ideally, if you maintain a strict budget for at least three years, you can create an adequate buffer and avoid spending your corpus fund in such situations. So, by keeping your corpus fund intact, you can maintain a consistent return in the long term.

Also Read: Assam’s Economy Will Be In Shambles If OPS Restored; Employees Under NPS Stand To Gain: Himanta Biswa Sarma

You must also be careful in choosing the investment instruments to ensure you don’t unnecessarily take risks and jeopardize your finances post-retirement, depending on your risk appetite, corpus fund and other income sources. These factors will help you decide which SWP schemes will suit you. For instance, there are conservative hybrid funds, balanced advantage funds, etc., which you can explore depending on your risk and financial profile.

After considering all these factors, select a plan that suits you most both in terms of returns and withdrawal options, like monthly, quarterly or yearly. A SWP plan gives the investor control over how much to withdraw and their frequency.

Also Read: What is PM SVANidhi Scheme? All You Need To Know

Here are some benefits of SWP for senior citizens.

Flexibility:

The investor can choose the amount and time of withdrawal—monthly, quarterly or yearly, providing flexibility and ease. Thus, it will help senior citizens smoothly transition to retirement with uninterrupted cash flows while ensuring financial security.

Financial Discipline:

Taking complete control of your finances, from reinvestment decisions to weighing risk and reward to withdrawal, budgeting and spending, will help inculcate financial discipline, which will go a long way in ensuring your financial security.

Also Read: Bank Of Maharashtra Among 4 Banks Revised FD Rates, Senior Citizens Can Get Up To 9.25%

Regular Income:

The SWP plan will ensure regular cash flows to help meet your daily budget while guaranteeing you never run out of cash and keeping your seed fund intact. If you already receive a monthly pension from your previous job, the returns from the SWP plan will be an additional income, which you can use to support other family members and relatives in need.

Transfer of Interest Income 

The SWP plan, once set, will credit the pre-determined amount to the investor’s bank account. The accrual of the SWP units depends on the market. If the market does well, the asset’s net value will also rise, ensuring a higher fund value and the buffer you need for a sustainable pension fund. Thus, SWPs could be hugely advantageous for senior citizens.

Also Read: 3 Questions To Ask Yourself Before Estate Planning And Why It Goes Beyond A Will