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Should an SWP be done from equity, hybrid, or debt fund?

Ashutosh Gupta discusses how one should go about investing for deriving regular income post-retirement

Should an SWP be done from equity, hybrid, or debt fund?

For regular income, some say that the SWP should be done from equity or a balanced advantage fund. Others say it should be done from a debt fund. Should I cut the cake in two and partly withdraw from both funds?
- Anand Pakiam

Here's the approach that we recommend to derive regular income. One should invest the next year's income requirement in a liquid fund and create a Systematic Withdrawal Plan (SWP) of 12 equal installments to derive steady income. This income need should not be more than 6 per cent of your accumulation. In an ideal world, the withdrawal rate should be less than that. So that takes care of your next one years' income requirement.

Another about 33-40 per cent of your overall accumulation can be parked in a couple of well-diversified equity funds, which will work towards beating inflation and provide for regular income, that is inflation-protected in your long years of retirement. And then finally, the remaining balance can be invested in a few high-quality fixed income alternatives to provide steady growth. If one follows this, one can transfer the next one years' income requirement in a liquid fund and create an SWP of 12 equal installments from that for regular income. With the remaining accumulation, one can rebalance it to ensure that the equity corpus remains in that 33-40 per cent range.

By following this roadmap, one can keep deriving regular income year after year without the risk of outliving it.

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