The SWP + STP Strategy
Keep 3-5 years of living expenses in debt funds (lower returns, lower tax). Set up an STP to transfer a fixed amount monthly from debt to equity funds. Run your SWP from the debt fund. This way, your equity allocation continues to grow for the long term while your short-term withdrawals come from the more stable debt portion.
Tax Benefits
Debt fund withdrawals are taxed at your income slab rate but only on the capital gains portion. By keeping 3-5 years of expenses in debt, you avoid having to sell equity units when markets are down. The STP ensures your equity allocation is gradually built back up over time.
Try the SWP Calculator
Plan your retirement withdrawals with our free SWP calculator.