Inflation Adjusted SWP Calculator

Unlock the Power of Your Savings: Introducing the Inflation Adjusted SWP Calculator by PaisaForever

As Indians, we plan, save and invest very carefully, dreaming of a future where we are comfortably retired, or financing our children’s schooling or other significant financial milestones. While Systematic Investment Plans (SIPs) help with wealth creation, the equally important process can be the effective withdrawal of wealth particularly if you are trying to create regular income. This is where a Systematic Withdrawal Plan (SWP) becomes crucial in planning withdrawals from your investment on a regular income basis. But one common mistake that can be detrimental is ignoring the invisible wealth destroyer – inflation.

At PaisaForever, we understand the importance of preserving your purchasing power. For this reason, we are delighted to present our new “Inflation-Adjusted SWP Calculator.” This unique tool allows you to plan your SWPs, or withdrawals, not just as a fixed amount, but as an amount that likely increases over time to maintain your purchasing power. Just think about it. The day you retire you may withdraw a sum of ₹50,000 today, we can simply add 6% inflation which would make that same amount worth much less in a few years. We have therefore incorporated inflation in our SWP calculator so we ensure your stream of income keeps up with inflation and protects your lifestyle.

Traditional SWP provides a set amount that depreciates in real value over the years. Our inflation-adjusted calculator allows you to insert an expected rate of inflation, and then it automatically adjusts your amount each year to reflect inflation. Therefore your monthly income will automatically increase, so you can afford the same baskets of goods and services tomorrow as you can today. Planning your withdrawals this way allows you the peace of mind of knowing that you have taken a proactive approach to planning your income for long-term sustainability, particularly all retirees, or those that will rely on their corpus for long term income.

Using the PaisaForever Inflation-Adjusted SWP Calculator means:       

• Real Buying Power: Your withdrawals keep their real value with inflation, yet an increase not a decrease.        
• Reduced Mental Stress: You will be able to budget your freely spent money knowing that your income has automatically adjusted to reflect the realities of the market.        
• Long-Term Deliberate Planning: The calculator allows you to model how long your corpus will last over that time (including the impact of inflation), which can plan in a far more sustainable manner.        
• You will then sleep easier: You reduce the worry of devaluating the money you have left, and can genuinely enjoy your financial independence.      

Do not let inflation slowly erode your hard-earned wealth. Use our Inflation-Adjusted SWP Calculator today and protect your financial future with a withdrawal strategy that works.

Frequently Asked Questions (FAQs) on Inflation & Inflation-Adjusted SWP

1. What is inflation?

Inflation is described as the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. When you live in India, this shows up when the cost of daily essentials goods like groceries, fuel, and even healthcare is rising over time.

2. Why does inflation matter for my financial planning in India?

Inflation affects your cost of living directly. If your income increases at a rate lower than inflation your purchase power declines and you will receive less value for your money. When planning for long-term financial objectives like retirement where you expect to spend a significant amount of money over the course of your retirement, failing to account for inflation could lead to a significant shortfall in achieving your lifestyle objectives.

3. What is a Systematic Withdrawal Plan (SWP)?

An SWP is a facility offered by mutual funds that allows investors to withdraw a fixed sum of money at regular intervals (e.g., monthly, quarterly, annually) from their investment corpus. The SWP is often used by retirees or those who are looking for a source of regular income from their accumulated wealth.

4. How is a regular SWP impacted by inflation?

In a regular SWP, you withdraw a fixed amount. So, if inflation is 6%, a monthly withdrawal of ₹50,000 will actually only feel like ₹47,000 (for purchasing power) next year, and the year after that it will feel even lower. After some time, a regular SWP is not going to replace your expenses as the fixed amount will become less in real terms to meet needed increases in expenses.

5. What is an Inflation-Adjusted SWP?

An Inflation-Adjusted SWP is a more evolved way of taking withdrawals in that your withdrawal is increased at outlined intervals (usually yearly) by a rate that you determine for inflation. This will help ensure that the real value of your withdrawals over time will remain in-tact, and your purchasing power will not diminish.

6. With consistent inflation in India, why consider an Inflation-Adjusted SWP?

Because there is consistent inflation in India, it is critical to have an inflation-adjusted SWP to keep your lifestyle of growing expenses intact. You can still keep your savings at risk of erosion and the inflation-adjusted SWP gives you a more realistic and sustainable income stream, especially with longer retirements.

7. What is the PaisaForever Inflation-Adjusted SWP Calculator?

With our calculator, you enter your initial investment, your desired initial withdrawal, your expected rate of return, and, importantly, your assumed inflation rate. The calculator will then show how your amount of withdrawal would increase year-on-year as inflation increases and how your corpus would deplete over your chosen time period.

8. What types of mutual funds are good for an Inflation-Adjusted SWP?

Hybrid funds (part equity, part debt) or balanced advantage funds are normally good for SWP as they are designed around a dual investment goal (grow money and get consistent returns). Debt-oriented funds can also work well for less aggressive risk profiles, but they may not consistently provide better returns than a higher (positive) rate of inflation. It would be wise to contact a financial advisor.

9. Will I deplete my corpus faster using an Inflation-Adjusted SWP?

Yes, by withdrawing more every year, generally, you would deplete your corpus faster to cash. However, the goal of an Inflation-Adjusted SWP is to ensure that you maintain your purchasing power. The calculator allows you to see how this will impact your income balance against your corpus being depleted.

10. What is a reasonable inflation rate to use in calculations for India?

Inflation rates will vary year after year. However, it is conservative to assume a long-term planning inflation rate of about 5-7% annually in India, and erring on the higher side provides some cushion.

11.  Can I change my SWP amount later?

The majority of the mutual fund houses provide wide discretion. You can usually modify your SWP instructions or cancel them as you see fit; but if you make major changes you should look at your larger financial plan.

12.  Are SWP withdrawals taxable for Indian tax law?

Yes, SWP withdrawals will be treated as capital gains tax. The taxation depends on the type of mutual fund (equity-oriented vs. debt-oriented) and the holding period of the units redeemed, you will be either taxed for short-term capital gains or long-term capital gains. We would recommend consulting a tax advisor.

Disclaimer : This calculator provides estimated results based on user inputs and assumed rates. It is for illustrative purposes only and should not be considered financial advice. Please consult a qualified financial advisor for personalized planning.