Hema, 61, recently retired with a corpus of Rs 70 lakh. She’s now looking to secure two things: A regular income of Rs 50,000 per month, rising with inflation, and a legacy of Rs 20–25 lakh for her grandchildren. It’s a well-intentioned plan. After all, what good is financial success if it can’t support a peaceful retirement and also provide for loved ones in the future? But this desire to achieve both income and legacy from a finite sum brings us to a question retirees rarely consider: What should be a sustainable withdrawal rate? The importance of withdrawal rate Hema’s initial plan is to withdraw Rs 6 lakh annually from her Rs 70 lakh corpus, increasing the withdrawal amount by 5 per cent each year to keep pace with inflation. This implies a starting withdrawal rate of 8.57 per cent. On the surface, it doesn’t look unreasonable until we simulate the numbers. Assuming an asset allocation of one-third equity and two-thirds debt, with equity expected to deliver 12 per cent annually and debt 7 per cent, the math turns uncomfortable. Her retirement savings would deplete quickly. In fact, the entire corpus would vanish in about 14 to 15 years. That’s barely halfway through a typical retirement. What this reveals is something many retirees overlook. Th
This article was originally published on June 20, 2025.
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