What percentage of the corpus can be safely withdrawn through SWP (systematic withdrawal plan) without impacting the principal over a period of five-ten years?
- KS Gandhi
The withdrawal limit depends on the kind of asset you are investing in. If you are investing in an equity fund, then the fund would be very volatile. If you are investing in an aggressive hybrid fund, it would be relatively stable as compared to an equity fund but would still be volatile. If the investment is in a conservative hybrid fund, the returns would be lower.
I would say that if you're investing in an aggressive fund, then maybe a withdrawal rate of about 6 to 7 per cent is good enough to support inflation-adjusted rising income requirements. If you are investing in a conservative hybrid fund, which invests about 20 to 35 per cent in equity and the remaining in fixed income, then I think you should never think of withdrawing more than 5-5.5 per cent initially and then, depending on the future performance, you may revise it periodically. So, a withdrawal rate of 5 to 7 per cent would be ideal.