How to Use SWPs to Generate Monthly Income Post-Business Exit

Jun 20

3 min read

TYou’ve earned the corpus. Now let it pay you—without stress or chaos.

A founder who sold his business once said:

“After the exit, I had ₹2.5 crores in the bank. I didn’t want to lock it up—but I didn’t want to draw it down randomly either.”

Another shared:

“I moved some of the money into mutual funds. But I was manually redeeming every time I needed cash. It felt messy.”

This is exactly where Systematic Withdrawal Plans (SWPs) come in.

If you’ve exited your business and are now sitting on a large corpus—an SWP helps turn that lump sum into structured monthly income, without the rigidity of FDs or the unpredictability of markets.

Let’s break down how it works, why it’s founder-friendly, and how to use it with intention.

Step 1: What Is an SWP?

A Systematic Withdrawal Plan (SWP) is a feature in mutual funds that allows you to:

Invest a lump sum once
Withdraw a fixed amount monthly (or quarterly)
Keep the rest of the money invested and growing

💡 It’s the reverse of an SIP (Systematic Investment Plan). Instead of putting money in every month, you take it out—smoothly and tax-efficiently.

Step 2: Why SWPs Work Well Post-Exit

✅ Provides steady income

→ Think of it as a monthly salary from your own capital

✅ Avoids emotional decision-making

→ No need to time redemptions or worry about cash reserves

✅ Keeps corpus growing

→ The balance stays invested, compounding quietly in the background

✅ Flexible and cancelable anytime

→ Unlike annuities or FDs, you’re not locked in

Step 3: What Kind of Funds Should You Use?

Choose funds based on your risk comfort and income timeline:

Fund Type	Use SWP for	Risk Level	Return Range (2025 est.)
Short Duration Debt Funds	Monthly income for next 3–5 years	Low to moderate	~6.5–7.5%
Arbitrage Funds	Income with tax efficiency	Low	~6–6.5%
Equity Savings Funds	Moderate risk income	Moderate	~7–9%
Balanced Advantage Funds	Income + growth	Moderate to high	~8–10% (long term)

For first 1–3 years of expenses, use debt/arbitrage funds for stability.

For longer-term SWPs, blend with hybrid/equity-oriented funds to beat inflation.

Step 4: How to Set Up an SWP

Invest a lump sum (say ₹1 crore) into the chosen mutual fund(s)
Register an SWP request: choose amount (e.g., ₹50,000/month), frequency (monthly), and start date
The fund will auto-credit that amount to your bank every month
Track your capital value quarterly—but don’t panic over short-term NAV dips

💡 You can pause, change, or stop the SWP any time.

Step 5: Understand Taxation

Every SWP payout = partial capital redemption.

Debt funds: Gains taxed at slab (post-2023 rules)
Equity/hybrid funds: LTCG taxed at 10% after ₹1L/year gains

✅ What’s good?

You’re taxed only on the gains portion, not the full withdrawal

→ More tax-efficient than interest from FDs or annuities

Step 6: Build a Simple SWP Strategy

Here’s a sample structure for ₹2 crore post-exit corpus:

Fund Type	Allocation	Purpose
Liquid Fund / ST Debt	₹30L	Emergency + 1st year income
Short Duration Fund	₹50L	SWP of ₹50K/month for 3–5 years
Arbitrage / Hybrid	₹50L	SWP + mild growth for 5–7 years
Balanced Advantage / Flexi Cap	₹70L	Long-term growth + future SWP (post 7 yrs)

Review once a year. Rebalance every 2–3 years.

TL;DR – Too Long; Didn’t Read

SWPs turn your corpus into monthly income without locking or panic withdrawals
Choose low- to moderate-risk funds for stability; blend equity for inflation protection
Taxed only on gains, not entire payout—more efficient than interest
Fully flexible: stop, increase, or redirect anytime
Great tool post-business exit to create a founder’s salary from capital

Your business gave you the lump sum.

Now it’s time to turn it into consistent cash flow—without spreadsheets or second-guessing.

Because peace of mind after an exit doesn’t come from hoarding capital.

It comes from designing it to support the life you’ve earned.