The Flaws of Traditional Annuities and Dividends
Retirees often rely on bank FD interest or annuity products for monthly income. However, annuity rates are typically locked in at low yields and taxed at marginal income tax brackets. A Systematic Withdrawal Plan (SWP) offers superior tax treatment and compounding preservation.
1. The Superior Tax Mechanics of SWP
Unlike FD interest where 100% of payout is taxable, each SWP installment is treated as a redemption consisting of principal return and capital gain. Only the capital gain portion is taxable, drastically lowering your effective tax burden.
2. The Safe Withdrawal Rate (SWR) Rule
To avoid portfolio depletion caused by sequence of returns risk, maintain an annual withdrawal rate of 4% to 6% from a balanced hybrid or conservative equity fund to outpace inflation.
3. Run Custom SWP Simulations on MyPlexus
The MyPlexus SWP Retirement Simulator backtests cash flow survivability against 20+ years of historical market cycles.
