1. Let's presume a retiree has meticulously accumulated his retirement corpus of 20 times his annual retirement expenses, i.e. 1.2 crores for annual expenses of 6 lakh.
2. Let's also presume that he has intelligently invested this corpus in a Hybrid Aggressive fund, with an estimated CAGR of only 10%, for taking care of 30 years of his retired life.
3. However, he feels more comfortable in withdrawing his 5% annual retirement needs of 6 lakh in lumpsum, instead of monthly drawals, due to his fear of unpredictable monthly market volatility.
4. So, in 30 years, while he will withdraw 1.8 crore for his retirement needs, he would still be left with a final corpus of 10.08 crore for bequeathal as he wishes.
5. If he wishes to increase his annual withdrawal by 5% every year, he will withdraw 3.99 crore for his retirement needs in 30 years, with a final corpus of 3.61 crore.
6. On the other hand, if he withdraws 50,000 per month as SWP for 30 years, or increases it by 5% annually if he wishes, he would be withdrawing similar amounts as in lumpsum cases, but his final corpus would be 10.53 crore and 4.33 crore respectively.
7. As this happens due to regular compounding of different retirement corpus amounts at any point of time, retiree can decide his own mode of 5% withdrawal (lumpsum or SWP) depending on his own risk perception of market volatility, although it shouldn't be of such grave concern during a long-term investment of this nature.
8. However, "timing" fund withdrawals should be avoided for long-term goals and should always be need-based for allowing fund corpus to grow in an optimal manner.
9. Also, a simple MF portfolio is ideally suited for retirement needs, and since Hybrid Aggressive funds have an auto-rebalancing mandate, this vital function gets performed by the fund itself, especially for a retiree with a moderate risk appetite.
10. For a retiree with a higher risk apetite, he can even allocate up to 50% in a Multicap fund for increasing his final corpus for bequeathal, with periodic rebalancing during his retired life.