SWP Calculator

A systematic withdrawal plan is the reverse of a SIP: instead of paying a fixed amount into a fund each month, a fixed amount is redeemed out of it. It is the standard mechanism for converting an accumulated pot into a regular income — most often at retirement, but equally for anyone who needs a predictable monthly sum from savings.

The important distinction from an annuity is that nothing is guaranteed. An annuity transfers longevity and market risk to an insurer in exchange for a fixed payment; an SWP keeps both risks with you and pays whatever you instruct it to, until the money is gone. That flexibility is the point — you keep control of the capital, can change or stop the withdrawal, and anything left passes to your estate — but it means the sustainability of the plan is entirely your responsibility to check.

The single most useful number in any drawdown plan is not the return assumption but the withdrawal rate: annual withdrawals as a percentage of the starting balance. It determines whether the plan is living off growth or spending down capital, and it does so almost independently of the specific return figure used.

The best-known reference point is the "4% rule", which emerged from studies of historical US market data examining what initial withdrawal rate, rising with inflation, would have survived a thirty-year retirement across every historical starting year. It was never intended as a law, and its assumptions — a specific asset mix, a specific market history, a fixed thirty-year horizon, no fees — are all worth questioning. But it remains a useful order-of-magnitude anchor: a plan withdrawing 3–4% a year is in the territory that has historically been sustainable over long horizons, while one withdrawing 8–10% is spending capital by design and will run dry.

A calculator applies one smooth rate; markets do not. For a portfolio being actively drawn on, the order in which good and bad years arrive changes the outcome dramatically — a phenomenon known as sequence-of-returns risk.

The reason is that withdrawals during a downturn sell units at depressed prices, permanently removing shares that would otherwise have participated in the recovery. Two retirees with identical average returns over twenty years can end up in completely different positions purely because one met a severe bear market in years one to three and the other met it in years eighteen to twenty. The second recovers; the first may never.

A flat monthly withdrawal loses purchasing power every year. At 5% inflation, a sum fixed today buys around 40% less after twenty years — so a plan that looks comfortable on paper can leave someone materially worse off in practice while the nominal payment never changes.

Setting the annual increase to roughly expected inflation is what keeps the real income constant, and it is the assumption most sustainable-withdrawal research is built on. It also makes the plan considerably harder to sustain: an escalating withdrawal compounds against a balance that is simultaneously being depleted, which is precisely why sustainable rates cluster nearer 4% than the 8% or 9% a flat-withdrawal calculation might appear to permit.