Latest news with #SystematicWithdrawalPlan
Hindustan Times
2 days ago
- Business
- Hindustan Times
Buying a house in your 40s or 50s: Which is the smarter financial move?
A Reddit post by a 53-year-old who lost his job has sparked discussion about the ideal time to buy a home. He shared that he purchased a ₹2 crore house seven years ago without taking a loan. Now, even after losing his job, he lives stress-free by relying on a Systematic Withdrawal Plan (SWP) to cover his expenses. His advice: don't rush into homeownership in your early 40s. Instead, take calculated risks, explore better career opportunities, and focus on building a solid financial foundation through investments. 'There's no need to hurry. Don't fall for FOMO,' he cautioned. The Reddit user compared his situation to a friend who bought a home 15 years ago and is still paying EMIs. His advice to younger people is to focus on saving, investing, and taking career risks instead of rushing to buy a house too early out of fear of missing out. "Don't rush into buying a house in your early 40s. Take risks, explore better job opportunities, and focus on investing as much as you can. Once you've built a strong financial base, then consider buying a home," the post said. "Life is meant to be enjoyed, not just spent repaying EMIs and loans. Yes, owning a home is important, but there's no need to hurry. Don't fall into the trap of FOMO," the post read. Others, however, are of the opinion that by the time you're 55, a home is more for your children than for yourself. Also Read: Key considerations for first-time homebuyers: Netizens say watch out for black mold and noisy open kitchens Reddit users agree that building a financial corpus is crucial when planning to buy a home. One user shared that they bought their first flat at 30 and repaid the loan within five years. They later purchased a second flat at 37 and are now working to clear that loan within two years. 'I'm earning decent rental income from my first property,' the user noted, emphasizing how early investments can yield long-term financial benefits. Another user highlighted that the value of homeownership goes beyond just utility. 'What about the emotional and legacy value a home provides?' they asked. For those who can afford it or are willing to take little risk, they argued, buying a home is worth it. 'At 55, the house is for your kids, not for yourself,' they said. Also Read: From Sholay to Bengaluru South: Can a name change revive Ramanagara's real estate market? Financial advisors say that the decision to buy a home depends on several personal and financial factors. 'People buy homes in their 30s or 40s, but some do it even in their late 50s. A lot depends on when you settle down, get married, and have children,' Suresh Sadagopan, a financial advisor, said. Family needs and the desire for stability, especially related to children's education, often influence the timing of a home purchase. Buying a home too early in one's career can create challenges. Limited budgets may force buyers to settle for smaller homes or locations far from the city centre, which may not be ideal in the long term. 'EMI planning is also critical,' Sadagopan advised. If both partners are earning and sharing the EMI, it works well. But in cases where the loan burden is high, say, for a ₹2.5 crore property where the couple contributes ₹50 lakh from savings and pays ₹70,000–90,000 each per month, it can become risky. 'If one person loses their job, the pressure becomes immense,' he said. Expensive properties also come with additional costs like stamp duty, registration, furnishing, and brokerage, which often are not recoverable. He advised homebuyers to exercise caution, especially when making big-ticket purchases. 'Don't try to do everything at once. You can furnish your home gradually over two to three years,' he said. He outlined two common approaches to homebuying. One involves purchasing an entry-level home early and upgrading later by building equity; the other is to wait, save diligently, and buy a dream home in one go. 'For those who struggle with financial discipline, buying early and leveraging equity for an upgrade later may be the smarter choice,' Sadagopan added.
Mint
30-05-2025
- Business
- Mint
How SWPs Can Help You Build Passive Income, Month After Month
In today's world, passive income is the ultimate financial superpower. Whether you're a retiree, a professional planning early retirement, or simply want your money to work for you, one tool stands out: the Systematic Withdrawal Plan (SWP). Here's a breakdown of how SWP can give you regular income, capital growth, and peace of mind—all at once. 1. What is Passive Income? * Income earned without active involvement. * Examples: Rental income, dividends, royalties, and SWP from mutual funds. * SWP allows you to withdraw a fixed amount monthly or quarterly from mutual funds. * Your capital stays invested and keeps growing while you receive regular income. 3. The 7% Withdrawal - 5% Growth Strategy * Invest in a balanced mutual fund with long-term average returns of 12%. * Withdraw 7% annually (e.g., Rs. 58,000/month from Rs. 1 crore). * Corpus still grows at net 5% per year. * Enjoy regular income + wealth creation. * Withdraw: Rs. 7 lakh annually * Expected return: 12% p.a. * Net Growth: Rs. 5 lakh (approx.) each year even after withdrawal 5. Benefits of SWP as Passive Income * Predictable, regular cash flow * Continued capital appreciation * Highly tax-efficient (especially in debt funds after indexation) * No TDS on withdrawals unlike FDs 6. Top Myths About SWP – Busted Myth 1: SWP will exhaust your capital quickly. Truth: Not if done right. With a 7% withdrawal and 12% return, capital can grow. Myth 2: It's risky to withdraw from mutual funds. Truth: Volatility is short-term. Good funds deliver consistent long-term returns. Myth 3: Fixed deposits are safer and better. Truth: FDs offer lower returns, are fully taxable, and can't beat inflation. SWP is more efficient. Myth 4: You need to be retired to use SWP. Truth: Anyone seeking regular income—business owners, professionals—can use SWP. Myth 5: SWP works only with large corpus. Truth: Even Rs. 10–15 lakhs can generate a decent monthly income using SWP. Myth 6: You'll have to pay high taxes. Truth: SWP benefits from long-term capital gains tax, often much lower than income tax slabs. Retirees looking for pension-like income Professionals planning career breaks Investors looking for monthly passive cash flow 8. Tips for a Successful SWP Plan Choose quality mutual funds with proven long-term track records. Stick to a withdrawal limit (not more than 7-8% annually). Rebalance or review annually. Use a good advisor to monitor performance and switch funds if needed. Final Thought: Passive income is not a luxury—it's a smart plan. Whether you dream of early retirement, want a monthly income, or simply more freedom, SWP is a disciplined and powerful way to achieve it. Note to the Reader: This article is part of Mint's promotional consumer connect initiative and is independently created by the brand. Mint assumes no editorial responsibility for the content.
New Indian Express
25-05-2025
- Business
- New Indian Express
Ensure regular cash flow post-retirement with SWP
Financial discipline is crucial after the age of 60 to ensure your retirement corpus lasts. At the same time, smart investment choices can make your retirement years more financially secure. A steady cash flow becomes essential to meet monthly expenses during retirement. Not everyone may have opted for a pension plan during their working years, and therefore might lack a regular source of income post-retirement. However, if you have built a sizeable corpus, you can still create a regular cash flow through effective investment planning. One smart strategy is a Systematic Withdrawal Plan (SWP). Under an SWP, you invest a lump sum in a mutual fund scheme and withdraw a fixed amount every month. While your investment continues to grow, you receive a steady monthly income. This ensures regular earnings while preserving capital, so that by the end of the withdrawal period, you are still left with a significant sum. For instance, if you invest ₹1 crore in a mutual fund and set up a monthly withdrawal of ₹25,000 over 20 years, you would withdraw a total of ₹60 lakh and could still be left with over ₹2 crore, assuming an average annual return of 6%. If you opt for a ₹50,000 monthly withdrawal under the same conditions, you would have withdrawn ₹1.2 crore and still retain around ₹94 lakh at the end of 20 years. It's important to set your withdrawal amount wisely so that the corpus lasts throughout your planned retirement period. For example, with a ₹75,000 monthly withdrawal and a 6% annual return, the corpus would be exhausted by the 18th year. The examples above assume a conservative 6% return, though equity mutual funds have historically delivered over 10% annually in the long run. However, after 60, most investors prefer to avoid heavy exposure to pure equity. An equity-oriented hybrid fund may be ideal in such cases. If you already have a significant portion of your portfolio in fixed deposits or debt funds, and can allocate ₹1 crore to equities, consider starting an SWP from a well-performing large- and mid-cap fund. According to Vishal Dhawan, a certified financial planner and co-founder of Plan Ahead Wealth Advisors, investors looking to do a SWP for retirement cash flow can consider short-term debt funds, high credit quality corporate bond funds, equity savings funds, balanced advantage funds, arbitrage funds, income plus arbitrage funds. 'You can choose to set up the SWP start date appropriately keeping in mind the exit load free period and your tax bracket,' he says. Another advantage of SWPs is their flexibility—you can adjust the withdrawal amount periodically based on the fund's performance. In this way, an SWP offers both regular income and capital appreciation, making it a smart post-retirement financial tool.
