SWP: Withdraw straight from equity? Not so fast

A user recently asked us: “For retirees, you suggest transferring annual requirements from hybrid//equity to liquid fund and do monthly SWP from there. Isn't it better to do so from the source fund itself?” At first glance, it does seem like an unnecessary extra step. Why add another layer when you could just pull money straight from where it’s invested? But here’s the thing: Retirement income planning isn’t just about simplicity; it’s about stability and safety. Let’s explore why tapping equity funds directly for regular income can backfire, and what you should do instead. Why is SWP from equity not ideal for retirees? For a retiree who’s depending entirely on their savings, relying on equity can be risky because it can blow hot and cold over shorter periods. There is a possibility that the equity investments fall in value at a time when you need the money. So what’s the alternative? Use a more stable source—like a liquid fund—for your monthly withdrawals. It keeps your income predictable and your anxiety in check. However, don’t park your entire retirement corpus in liquid funds. Although liquid funds may be safe, they’re not great at growing your money. So, you risk running out of funds in later years. Which is why here’s the smart middle path we suggest: Keep the next 12 months’ expenses in a liquid fund. This covers your short-term needs smoothly. Invest the rest in equity and debt funds in a 35:65 ratio. Equity helps your money grow and beat inflation. De

This article was originally published on June 18, 2025.