Annuity vs SWP: which gives more income?
Comparing a guaranteed annuity payout against a market-linked SWP.
An annuity and a systematic withdrawal plan (SWP) can both turn the same lump sum into a monthly income — but they price that income completely differently. One guarantees the payout and the term. The other depends entirely on what the market actually does along the way.
Same corpus, same income, two different guarantees
An annuity fixes the deal upfront: hand over a lump sum, receive a set monthly payout for a set number of years, guaranteed regardless of what markets do in the meantime. An SWP instead keeps your money invested and withdraws a fixed amount each month, with the balance still exposed to market returns — it could run out sooner than expected in a bad stretch, or comfortably outlast the equivalent annuity if returns hold up.
How long the money actually lasts
The Annuity Calculator’s own defaults — a ₹50,00,000 corpus at a 6.5% annuity rate, 20-year term — produce a monthly payout of ₹37,278.66. Running that identical monthly withdrawal through the real computeSwp formula on the same ₹50,00,000 corpus: at a 6.5% assumed return (matching the annuity rate exactly), the SWP also depletes at exactly 20 years— the two are mathematically equivalent at the same rate. At a more market-linked 8%, the same withdrawal stretches to 28.3 years. At 10% or higher, the corpus never depletes within 50 years at all — it keeps growing even as the withdrawals continue.
Estimate the monthly payout you'd receive from an annuity purchase.
Plan a systematic withdrawal from your corpus and see how long it lasts.
What you’re really trading
The SWP’s longer runway at higher assumed returns looks like a clear win, but it comes from an assumption, not a guarantee — the annuity’s 20-year, ₹37,278.66-a-month payout happens regardless of what markets do, while the SWP’s outcome depends on the sequence of returns it actually experiences, not just their average. Sequence of returns risk means a bad run early in the withdrawal period can deplete an SWP corpus far faster than a single deterministic projection suggests, even at the same average return used above.
An SWP also leaves a residual estate if the corpus outlasts you, which an annuity generally doesn’t — something worth weighing alongside the income comparison if leaving money behind matters to your plan. Neither option is universally better; the right choice depends on how much guaranteed certainty you want versus how much market risk you’re willing to carry into retirement.
All figures are indicative and for educational purposes only — not financial advice.
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