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How does a Systematic Withdrawal Plan Help With your Retirement

  6/27/23 10:36 AM

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The Systematic Withdrawal Plan (SWP) is one of the most commonly used methods to structure a retirement plan. In an SWP, you invest across a wide variety of asset classes such as Unit Linked Insurance Plans (ULIPs) and withdraw a proportionate amount every month to supplement your retirement income. The best ULIPs in India offer you the choice to set up an SWP for retirement.

The SWP feature in the best ULIPs in India allows your savings to grow at an average rate of return, which is sufficient to fulfil your retirement income needs, as well as combat the impact of inflation during retirement.

Understand how an SWP helps you with your retirement:

What are SWPs in ULIPs? 

In the concept of ULIP, an SWP feature allows you to withdraw your funds from the ULIP policy in a phased manner. This means that you take money from your ULIP plan in instalments rather than withdrawing all at once (lump sum). This can help you create a regular income stream for retirement.

In the SWP feature, you can customise the cash flow from your ULIP plan as per your needs. You could take out the capital gains regularly or fix a specific withdrawal amount at your preferred frequency. The remaining balance stays invested in the ULIP plan garnering effective returns with time. This helps you access regular income and returns while also stay invested in the ULIP plan.

Alternatively, the SWP can also be used by retirees to evade the market fluctuations and keep their retirement corpus safe. You can do this by channelling your investment from the ULIP policy to a preferred savings bank account to deal with a fluctuating market scenario.

How does an SWP help retirees?

Retirement is the golden period of your life. However, to secure the non-working years of your life, you must take vital investment decisions in the present. This means that you not only have to invest wisely but also plan how to effectively withdraw your money so that you do not outlive your retirement savings.

An SWP can be helpful for retirees because of these benefits:

  • Given the rising cost of living, an SWP helps to create a regular source of secondary income for retirement. You can invest in the best ULIP and opt for an SWP feature to get a regular income in the future.
  • An SWP can also help to create a pension plan for retirement. By investing in a ULIP even five years before retirement, you can easily create a reliable pension for retirement.
  • As you draw closer to retirement, you become more risk-averse and aim for capital preservation than high returns. With an SWP, you can easily evade the volatile market situations by transferring your funds into a savings account when the market drops and reinvest when it gains.

What are the different benefits of an SWP?

An SWP is a safe option for retirees because it provides various benefits. With the help of the SWP feature, you can take timely withdrawals as per your retirement financial needs. 

The main advantages of choosing the SWP are:

  • Disciplined withdrawals and investing: When you opt for an SWP feature, you choose a particular frequency for withdrawals. This means that a specified sum will be withdrawn from your ULIP policy at your agreed frequency (monthly, quarterly, half-yearly, annually), regardless of the market situation. This means that even during volatile market situations, you will not be able to withdraw a significantly large sum.

Instead, with systematic drawings, you can safeguard your corpus and also stay invested to earn high profits in the long run. That said, an SWP also withdraws your money when the market is high. This is beneficial since this helps you avoid the impulse to invest more during a market boom.

  • Fixed retirement income: The SWP feature can help create a reliable source of fixed income during your retirement years. This money can be used to maintain your standard of living during retirement as well as help you easily pay for retirement expenses such as medical costs, travel costs, etc.

Further, an SWP is also advantageous during the working years. An SWP allows you to schedule your withdrawals as per your financial need, such as pay for your child’s education, home loan EMIs, pay car EMIs, etc. 

  • Financial goals: An SWP is also a great medium to help you achieve your financial goals. For instance, if you wish to own a car during retirement, you can use the SWP strategy to pay for the car loan EMI. With this, you can ensure that your goal is funded in a phased manner without burdening you all at once.

The SWP feature will provide you with the funds at the right time, enabling you to achieve your goal without delaying it because of a cash crunch. 

  • Tax efficiency: An SWP is also extremely beneficial from a tax perspective. The drawing taken under the SWP feature from the ULIP plan is regarded as redemptions. Redemptions are not subject to any TDS (Tax Deduction at Source). This means that you only need to pay tax on the ULIP plan on the income or earnings from your ULIP policy. You do not owe tax on the capital portion of your withdrawals. 

Moreover, since you have the choice to structure your SWP withdrawals to only take the appreciation or earnings of your ULIP, you can avoid paying tax in this manner. 

Edelweiss Tokio ULIP Plans

If you are looking for a good ULIP plan that can help you safeguard the golden years of your life with a reliable income source, trust ULIP plans from Edelweiss Tokio Life Insurance. You can save, invest and withdraw systematically to fulfil your retirement requirements easily and evade the negative market fluctuations. Edelweiss Tokio ULIP plans give you comprehensive ULIP benefits along with an SWP, fund additions and tax benefits at minimum ULIP charges.

Final Words

Overall, the best ULIPs in India offer the SWP feature, which is extremely advantageous for retirees. You get a regular income flow along with an option to redeem only the money required and keep the rest invested for long-term gains. It is a great substitute for a pension, and you have the flexibility to start or discontinue it as per need.


Siddhant Dubey - Writer & Photographer

Siddhant works as a freelance content writer who is interested in a wide range of spheres from photography and personal finance to cooking. He is also an aspiring photographer striving to showcase life around him through his vision.

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