How I Use Debt Funds to Help Retirees Get a Steady Monthly Income—Without Worrying About Market Volatility

I Recently Met a Retired Client Who Needed a Reliable Monthly Income—Here’s What I Suggested

As a CERTIFIED FINANCIAL PLANNER™, I often meet retirees or those nearing retirement who have one key concern:

“Taresh, how can I get a regular monthly income without touching my principal?”

One such client, whom I’ll call Ojas, had spent years in corporate sales, excelling at work but barely paying attention to his personal finances. His older brother Tejas had handled most of the investments for their family—mostly FDs, bonds, and schemes like Senior Citizen Savings Scheme and Post Office Monthly Income Scheme.

But Ojas came to me with a deeper question:

“Is there a way I can earn regular monthly income and still grow my capital, without high risks?”

And this is where I introduced him to a little-known but powerful tool I’ve used for dozens of my retired clients in India—Systematic Withdrawal Plans (SWPs) from Debt Mutual Funds.

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What is a Systematic Withdrawal Plan (SWP)?

Think of SWP as a reverse SIP.

Just like in SIPs, you systematically invest each month, in an SWP, you withdraw a fixed amount each month from your mutual fund investment—say ₹10,000 per month.

But here’s the beautiful part:

Your money remains invested and growing, while you withdraw a part of it tax-efficiently.

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Why I Recommend SWPs from Debt Mutual Funds for Retirees

When Ojas asked me, “Taresh, why not just put the money in an FD?”, I gave him four solid reasons:

1. Better Tax Efficiency

Unlike FDs that tax the entire interest as income, mutual funds are taxed only on the gains portion of your withdrawal. This means, in many cases, your effective tax liability is much lower.

For instance, if you withdraw ₹20,000 but only ₹1,000 of that is gain, you are taxed only on ₹1,000—not the entire ₹20,000 like in an FD.

This can boost your post-tax returns by 1–2% every year.

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2. Flexibility

You can choose to withdraw monthly, quarterly, or even yearly, based on your needs.

If you suddenly need ₹50,000 for a medical expense, you can pause the SWP and redeem as needed.

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3. Growth + Stability

By staying invested in short-duration or corporate bond funds, your capital gets the chance to grow steadily, without the market swings of equity funds.

This gives you the peace of mind that your money is safe, yet not stagnant.

Also read: How to Confidently Overcome All Your Limiting Beliefs on Your Journey to Riches and True Wealth with Wisdom in 11 Steps

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4. Legacy Planning

SWPs allow retirees to live off their earnings, without touching their core principal. Over 10–15 years, this helps them preserve wealth for their spouse or children as inheritance.

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A Real Example I Use for My Clients

Let’s say you invest ₹10 lakhs in a debt mutual fund with an average return of 7.5%.

You start a monthly SWP of ₹10,000.

Here’s what happens:

• You withdraw ₹1.2 lakhs over the year.

• Your fund still earns ₹75,000 (at 7.5% return).

• Net capital reduction is just ₹45,000 in the first year.

• With compounding, your capital can last over 12–14 years, even with regular monthly income.

This approach ensures income without eroding your wealth immediately—something an FD simply can’t match.

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But Taresh, What About the Risk?

Great question—and I always tell my clients this:

“Debt funds are not risk-free. But they’re measurably safer than equity and give better tax-adjusted returns than FDs.”

Of course, I never recommend a single fund. I diversify across 2–3 debt schemes (short-duration, banking & PSU, and corporate bond funds), and rebalance yearly.

Plus, I always suggest investing through a SEBI-registered mutual fund distributor or CFP who monitors your funds proactively.

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How This Helped Ojas—and How It Can Help You Too

When I explained this strategy to Ojas, he said:

“I wish someone had told me this earlier. I’ve been living off FD interest and struggling to keep up with inflation!”

We immediately set up a withdrawal of ₹25,000/month from a carefully selected debt mutual fund portfolio. Six months in, he now tells me:

“Taresh, I’ve never felt more relaxed about my finances. The money comes like a salary—and I don’t even worry about taxes.”

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My Final Advice to Retirees in India

If you or your parents are nearing or already in retirement, please don’t leave your entire corpus in FDs or savings accounts.

There’s a smarter way to earn monthly income, beat inflation, and save taxes.

Look into Systematic Withdrawal Plans from debt mutual funds.

Choose tax-efficient, stable, and well-rated debt funds.

Work with a CFP® or an advisor who monitors and rebalances your retirement portfolio annually.

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Summary: What You Should Do Next

• Switch from FDs to SWPs (for better taxation)

• Use short-term or corporate bond debt funds

• Withdraw monthly via SWP while letting capital grow

• Consult a professional to plan cash flow and review annually

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Want to Learn More?

If you’re a couple or an individual nearing retirement, I invite you to explore how to use debt mutual funds and SWPs to create a worry-free retirement lifestyle.

Join me live in my upcoming free session where I break this down in detail.

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Taresh Bhatia, CFP®

CERTIFIED financial-planner-gurgaon/" target="_blank" rel="nofollow">FINANCIAL PLANNER™

Founder – The Richness Academy

Contact Me Directly:

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Email: taresh@tareshbhatia.com

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Website: www.tareshbhatia.com

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