1. Mathematically, 1% per month can be withdrawn from a retirement corpus perpetually if it is growing at 12.7% CAGR and above (without discounting annual inflation).
2. Historically, all the Top 10 funds in largecap, multicap, midcap, large & midcap, ELSS, value-oriented and hybrid-aggressive fund categories are currently growing at a much higher CAGR since their respective launch dates 10-25 years ago.
3. However, future returns of these funds - and others too - would depend entirely on our country's economic growth and performance of their fund management teams.
4. As this is always unknown and only in the realm of conjecture, albeit with a positive long-term outlook, it is best to be conservative in our monthly withdrawal needs during retirement.
5. Ideally, a retirement corpus of 25 times of your estimated annual retirement expenses should be aimed to be built first during your earning years prior to retirement.
6. Thereafter, a safe withdrawal rate should be adhered annually, being an amount of money that you can withdraw from your investments each year after retirement, with the ability for future year’s withdrawals to increase with inflation, and with a high likelihood that this corpus will last for the remainder of your life expectancy, even if it delivers below average returns at times.
7. The typical 4% withdrawal rule recommends annual withdrawal of a fixed amount equal to 4% of your retirement corpus, and annually rebalance it in a 60%-40% mix of equity and debt products, to give you a greater chance of sustaining it during your entire retired life.
8. After reaching an advanced life stage, when existence years become lesser, then 4% annual withdrawal can also be increased.
9. As 4% rule is a guideline, so if your equity portfolio performs better, then you can afford to withdraw a bit more than the 4% rule amount during that year after adequate portfolio rebalancing.
10. On the other hand, during a sustained bear market, you should reduce your withdrawals too to maintain the equity:debt ratio.
2. Historically, all the Top 10 funds in largecap, multicap, midcap, large & midcap, ELSS, value-oriented and hybrid-aggressive fund categories are currently growing at a much higher CAGR since their respective launch dates 10-25 years ago.
3. However, future returns of these funds - and others too - would depend entirely on our country's economic growth and performance of their fund management teams.
4. As this is always unknown and only in the realm of conjecture, albeit with a positive long-term outlook, it is best to be conservative in our monthly withdrawal needs during retirement.
5. Ideally, a retirement corpus of 25 times of your estimated annual retirement expenses should be aimed to be built first during your earning years prior to retirement.
6. Thereafter, a safe withdrawal rate should be adhered annually, being an amount of money that you can withdraw from your investments each year after retirement, with the ability for future year’s withdrawals to increase with inflation, and with a high likelihood that this corpus will last for the remainder of your life expectancy, even if it delivers below average returns at times.
7. The typical 4% withdrawal rule recommends annual withdrawal of a fixed amount equal to 4% of your retirement corpus, and annually rebalance it in a 60%-40% mix of equity and debt products, to give you a greater chance of sustaining it during your entire retired life.
8. After reaching an advanced life stage, when existence years become lesser, then 4% annual withdrawal can also be increased.
9. As 4% rule is a guideline, so if your equity portfolio performs better, then you can afford to withdraw a bit more than the 4% rule amount during that year after adequate portfolio rebalancing.
10. On the other hand, during a sustained bear market, you should reduce your withdrawals too to maintain the equity:debt ratio.