Effective Uses of Systematic Withdrawal Plan (SWP)
1. Retirement Planning: SWP can be a valuable tool for building a retirement income strategy. By investing in suitable funds during working years and setting up an SWP during retirement, individuals can ensure a steady income stream.
2. Education Expenses: If investors want to save for their child’s education, they can use SWP to fund tuition fees and other educational expenses.
3. Supplementary Income: SWP can serve as a supplementary income source to meet various financial goals like purchasing a vehicle, taking a vacation, or covering medical expenses.
4. Asset Allocation: SWP allows investors to rebalance their portfolio without incurring significant transaction costs. Investors can use it to maintain their desired asset allocation by withdrawing excess gains from one asset class and reinvesting them in another.
5. Tax-Efficient Withdrawals: By strategically withdrawing from tax-efficient funds or timing withdrawals to take advantage of tax benefits, investors can minimise their tax liability.