Withdraw with a Safety Net
Safe Withdrawal Rate in India
How to Retire Without
Running Out of Money
Why should we care
You’ve saved your whole working life. Maybe you have ₹1 crore, maybe ₹2 crore. The big question now is simple: how much can you safely spend each year without running out of money?
Many Indians still follow the famous 4% rule derived from the U.S., which says you can withdraw 4% from your retirement corpus every year, adjusted for inflation, and your money should last 30 years. Come India, we have higher inflation, different taxes, and more volatile markets. The 4% rule doesn’t hold up here.
India’s Real Picture
Over the past 25 years, Indian inflation has averaged nearly 5.8%. Healthcare costs rose over 11% every year. The Nifty50 (TRI) delivered about 13.5% CAGR returns, government bonds 7.5%, fixed deposits 6.7% and PPF 7.78%
The Findings
When researchers back-tested 25 years of Indian data, they found that a 4% withdrawal often exhausted the corpus within 23 years. The safe zone here is between 3.3 and 3.6%. This points out that, if you retire with ₹1 crore, you can withdraw ₹3.3 to 3.6 lakh a year, adjusted each year for inflation. It does sound small, yet safe.
Safety Net in this case ensures that you don't run out of any residual corpus form your retirement fund, in case you outlive the average life expectancy. Your money is meant to last your lifetime, not just 20 years.
Why Lower is Safer
Each 1% rise in inflation cuts your safe withdrawal rate by around 0.2 points. So when inflation crosses 6.5%, your safe rate falls closer to 3%.
If your first few retirement years face a market crash, it can cause lasting damage to your portfolio. A slightly lower withdrawal early on gives your investments time to recover.
The Best Balance
A balanced portfolio (50% equity and 50% debt) has worked best in real-life scenarios. It promises solid growth without extreme volatility. At a 3.4% withdrawal rate, this portfolio usually lasts 28+ years, even through tough periods like the 2008 and 2020 crashes. Purely conservative portfolios preserve money but fail to beat inflation. Purely equity ones grow faster but swing too hard to retain peace of mind.
How to Make it Work
2. Keep 50–60% of your money in equity mutual funds for growth.
3. Hold the rest in PPF, fixed deposits, or debt mutual funds.
4. Rebalance once a year to restore your mix.
5. Keep 1–2 years of expenses in liquid funds or savings accounts.
6. Spend less after poor market years, slightly more during good years.
These steps increase your portfolio’s life significantly by 5-7 years.
Inflation and Longevity
India’s inflation doesn’t stay stable. Prices double roughly every 12 years. Healthcare and education rise even faster. At the same time, people are living longer.
Life expectancy has crossed 72, and many retirees will need to survive 30 to 35 years post-retirement. A sustainable withdrawal plan needs to survive both high inflation and long life.
What Policymakers
Ought to Do
Punchline: Public education on financial longevity is as important as earning returns.
Simple rules for a long-lasting retirement:
* Withdraw 3.3 to 3.5% a year.
* Keep 50 to 60% in equity for growth.
* Rebalance every year.
* Review your plan every alternate year.
* Spend less in bad markets.
* Avoid chasing high returns; protect what you have.
Bottom Line
Retirement success depends less on luck and more on discipline, that is steady withdrawals, intelligent re-balancing, and hardcore patience.
- Sayan Das,
Friday, Nov 14, 2025.
