What is a systematic withdrawal plan?

A systematic withdrawal plan is characterized by an investor withdrawing a predetermined, fixed amount of money from their investment account at regular intervals, such as monthly or annually. This strategy is often utilized in retirement planning, where investors need to convert their accumulated assets into a stream of income. By setting a consistent withdrawal rate, it allows for better budgeting and financial planning, ensuring that funds are disbursed in a controlled manner that aligns with the investor's needs.

Depending on the specific terms of the plan, this approach can help manage market volatility risks, as it can provide a steady cash flow even during market downturns. Additionally, it can help investors avoid the pitfalls of emotional decision-making related to withdrawals, as the plan involves a pre-defined strategy that promotes discipline in drawing down investments.