Most people in India prefer Fixed Deposits (FDs) when planning for retirement, believing they are the safest option to secure their savings. However, what many fail to realize is that while FDs may seem like a reliable choice, they are actually losing value in the face of inflation. The returns on FDs may be fixed, but they often do not keep pace with the rising cost of living.

This means that the purchasing power of the money you accumulate through FDs could diminish over time. Professionals like a mutual fund advisor in Chennai can help you invest in SWPs, that offer a more effective solution for generating regular income during retirement.

Why Are SWPs Better Than FDs?

Before diving into how a professional can help with SWPs, let’s first explore why SWPs are often a better option than FDs, especially for those planning long-term financial goals like retirement.

1. Higher Potential Returns

Unlike Fixed Deposits, which offer fixed and often low returns, mutual funds (from which SWPs are derived) have the potential to provide higher returns, depending on the market performance. While mutual funds come with their own set of risks, they tend to outperform FDs over the long run. This is crucial for retirees or investors looking to protect their wealth from the eroding effects of inflation.

2. Flexibility in Withdrawals

FDs lock your money in for a fixed period, meaning that you cannot access it freely without penalty in case of an emergency. On the other hand, SWPs offer much greater flexibility. You can choose how much to withdraw and when to do so, based on your financial needs. This is particularly important for retirees who may need consistent income while still keeping their investments growing.

3. Inflation-Protection

As mentioned earlier, inflation slowly reduces the purchasing power of your money. With FDs, the interest you earn may not be enough to outpace inflation. SWPs, backed by mutual fund investments, offer an opportunity for your capital to grow and earn higher returns, helping to offset the impact of inflation over time. This ensures that your withdrawals maintain their value in real terms.

4. Regular Income without Draining Capital

FDs pay interest periodically, but they don’t necessarily offer a source of income that aligns with inflation-adjusted expenses. With an SWP, you can create a steady income stream from your investment, and because the plan is based on mutual fund investments, your capital may still grow. This way, you can withdraw money regularly without draining your entire corpus.

How Does an Advisor Help?

Now that we understand the advantages of SWPs over FDs, the next logical question is: How can a mutual fund investment planner in Chennai help with SWPs? Well, they play a crucial role in guiding investors on the optimal use of SWPs.

1. Personalized Financial Planning

Each investor has different financial goals, risk appetites, and time horizons. An advisor can assess your financial situation and retirement goals to recommend an SWP strategy tailored to your specific needs. This personalized approach helps ensure that you make the right investment decisions and maximize the benefits of your SWP.

2. Selecting the Right Mutual Funds

Choosing the right mutual fund to generate the SWP income is one of the most critical steps. With thousands of mutual fund options available, an advisor can guide you in selecting funds that are suited to your goals, risk tolerance, and time horizon. Whether it’s equity funds, debt funds, or hybrid funds, the right mix is essential to balance risk and return. A financial advisor can also recommend specific schemes that have a history of strong performance, increasing your chances of earning steady returns.

3. Tax Planning

While SWPs are a great option for generating regular income, they also have tax implications. Depending on the type of mutual fund and the holding period, your withdrawals may be subject to Short-Term Capital Gains or Long-Term Capital Gains (LTCG) tax.

4. Adjusting the Plan as per Market Conditions

The financial markets are dynamic, and mutual fund performance can fluctuate based on market conditions. An advisor can monitor the performance of your mutual funds and recommend adjustments to your SWP strategy. This might involve shifting between different funds or adjusting the withdrawal amount to ensure that your plan continues to meet your income needs without depleting your capital prematurely.

5. Minimizing Risks

Investing in mutual funds comes with market risks, which can cause fluctuations in the value of your investments. However, with a proper strategy in place, these risks can be managed effectively, and a professional can help you with that.

6. Retirement Planning

For those planning for retirement, SWPs can be a game-changer. An advisor can integrate SWPs into your larger retirement plan, taking into account your retirement age, expected expenses, and current savings.

Conclusion

While people still prefer Fixed Deposits for their retirement plans, it’s clear that SWPs offer a far better option, especially when it comes to outpacing inflation, providing regular income, and offering flexibility in withdrawals.