retirement fund
If you have a corpus of Rs 2 crore at the time of retirement, then the biggest question is how much income can be withdrawn every month and for how many years will this money last. The answer is not straightforward, because it depends on your investment style, returns, inflation and retirement period.
What is safe withdrawal rate and why is it important?
According to financial experts, adopting Safe Withdrawal Rate (SWR) in retirement is the wisest approach. This means that you should withdraw only a fixed percentage of your total fund every year, so that the money lasts for a long time. Generally a withdrawal rate of 4% is considered balanced.
- Around ₹50,000/month at 3% (low risk)
- Approx ₹67,000/month at 4% (Balanced)
- Around ₹83,000/month at 5% (higher risk)
The method of investment will decide your income
Where your money is invested makes a big difference to your income.
Conservative Portfolio (Safe Investment)
- If the money is in FD, bonds or government schemes, then you can get 66.5% return.
- Estimated Income: ₹65,000₹70,000/month.
Hybrid Portfolio (Debt + Equity)
- There is a balance of risk and return in this.
- Estimated Income: ₹75,000₹85,000/month
Aggressive Portfolio (Equity High)
- There is a possibility of higher returns in the long run, but there are also higher fluctuations.
- Estimated Income: ₹85,000₹95,000/month
How to withdraw money?
Experts advise that it is not necessary to withdraw equal amount of money from all asset classes (equity, debt, gold). When the stock market is falling, reduce withdrawals from equities. At that time, meet your expenses through debt or safe investments. Rebalance the portfolio when the market improves. Ignoring inflation can prove costly. The biggest threat in retirement is inflation. If the average inflation is 5%, your expenses will increase every year. For example, a monthly expense of ₹50,000 today could exceed ₹1.5 lakh in 2025. Therefore, it is important that your portfolio also includes equity or growth investments, so that your money can grow faster than inflation.
Adopt 3-bucket strategy
According to experts, the 3-bucket strategy is very effective for retirement planning.
- 1218 Months Expenses: In Liquid Funds
- 23 years of expenses: in debt funds
- Rest of the money: In equity/hybrid funds
This method gives you regular income as well as growth in the long term.
- Keep these things in mind while planning
- Always keep 23 years of expenses in safe investments
- Avoid selling equity when the market falls
- Make a plan for health expenses and longevity
- Review your investments and withdrawals every year. A retirement fund of ₹2 crore can give you a comfortable life with proper planning. But instead of just focusing on earning more income, it is important that your income remains sustainable in the long run and the impact of inflation is reduced.
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