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				<title>What withdrawal rate do you recommend for retirement planning?</title>
				<link>https://freefincal.com/what-withdrawal-rate-do-you-recommend-for-retirement-planning/</link>
				<pubDate>Tue, 02 Jun 2026 00:30:15 +0000</pubDate>
								<dc:creator><![CDATA[M. Pattabiraman]]></dc:creator>				<guid isPermaLink="false">https://freefincal.com/?p=255181</guid>
					<description><![CDATA[Last Updated on June 2, 2026 at 8:11 am DIY investors often ask us, &#8220;What...]]></description>

				<content:encoded><![CDATA[<figure><img src="https://freefincal.com/wp-content/uploads/2022/09/Annuity-ladder-along-with-expenses-after-retirement.jpg" class="type:primaryImage" /></figure><p id="post-modified-info">Last Updated on June 2, 2026 at 8:11 am</p>
<p>DIY investors often ask us, &#8220;What withdrawal rate do you recommend for retirement planning?&#8221; — a discussion.</p>
<p>The withdrawal rate is defined as the annual expenses in (the first year of) retirement divided by the corpus. Typically, this is estimated before or at retirement and is known as a &#8220;Safe withdrawal rate&#8221; (SWR). Backtesting is employed to determine a suitable SWR. By analysing data from both equity and debt markets, we can establish the withdrawal rate that allows the retirement fund to last longer than the individual&#8217;s lifespan in most cases.</p>
<p>Based on US market history, backtests initially determined the SWR to be about 4%, although recent market data have indicated its limitations; for some history and why we need to look for alternatives, see: <a href="https://freefincal.com/why-we-need-to-stop-using-safe-withdrawal-rate-4-rule-for-retirement-planning/">Why we need to stop using Safe Withdrawal Rate (4% rule) for retirement planning</a>.</p>
<p>There is little point in backtesting using Indian market data because the history is too short. In any case, our retirement plan should reduce the sequence of returns risk with a combination of retirement buckets and annuities. This is so much easier to do when retirement is far away.</p>
<p>Our <a href="https://freefincal.com/robo-advisory-software/">robo-advisory tool</a> never bothers with withdrawal rates.</p>
<p>We implement the income bucket approach to mitigate the negative impact of poor investment performance during the initial retirement years. This approach ensures a reliable income for the first 15 years of retirement, adjusted for inflation. Meanwhile, the remaining funds and an emergency fund are divided into low-risk, medium-risk, and high-risk buckets. This strategy reduces the need for constant adjustments and uncertainties in managing these buckets.</p>
<p>Detailed illustrations are available here:</p>
<ul>
<li><a href="https://freefincal.com/i-am-30-and-wish-to-retire-by-50-how-should-i-plan-my-investments/">I am 30 and wish to retire by 50. How should I plan my investments?</a></li>
<li><a href="https://freefincal.com/retirement-plan-review-am-i-on-track-to-retire-by-50/">Retirement plan review: Am I on track to retire by 50?</a></li>
</ul>
<p>In addition, two further options are available.</p>
<ul>
<li>We can set up an <em>income floor</em>.<i> </i>That is, buy an annuity or an RBI bond for some of the annual expenses in the first year of retirement. This income is guaranteed for the lifetime of the younger spouse. See, for example, <a href="https://freefincal.com/ideal-retirement-plan-income-flooring/">Creating the Ideal Retirement Plan with Income Flooring!</a></li>
<li>We can periodically buy such bonds (bond ladder) or annuities (annuity ladder) to reduce the stress of managing retirement buckets. See: <a href="https://freefincal.com/annuity-ladder-calculator/">Use this annuity ladder calculator to plan retirement with multiple pension streams</a>.</li>
</ul>
<p>So, our aim should not be to focus on some fixed SWR. It should be to ask, &#8220;How best am I prepared for poor returns from equity and fixed income after retirement?&#8221;</p>
<p>We mention the withdrawal rates for the above scenarios using the <a href="https://freefincal.com/robo-advisory-software/">freefincal robo advisory tool</a>.</p>
<p><strong>Assumptions and inputs</strong></p>
<ul>
<li>Age 30; Age of spouse: 28</li>
<li>Current monthly expenses that will persist in retirement: Rs 50,000</li>
<li>Retirement age: 55</li>
<li>Years to retirement 25</li>
<li>Total average monthly expenses (annual/12): 50,000</li>
<li>Percentage by which your monthly investments can increase each year (until you have accumulated enough for retirement): 10%</li>
<li>Post-tax return expected from equity investments 10%</li>
<li>Post-tax return expected from current taxable fixed income 5%</li>
<li>Rate of return expected from current tax-free fixed income 6%</li>
<li>Inflation before retirement 7%</li>
<li>The assumed life expectancy of the younger spouse: 90</li>
<li>Inflation during retirement: 6%</li>
<li>Monthly expenses in the first year of retirement: Rs. 2,71,372</li>
<li>Years in retirement (until younger spouse reaches age 90) 37</li>
<li>For convenience, the accumulated corpus is assumed to be zero (the tool will account for your current corpus).</li>
</ul>
<p><strong>Result 1:</strong> Corpus required with no income flooring or laddered annuity: Rs. 9.82 Crores. <strong>Withdrawal rate: 3.31%</strong> (withdrawal rate here only refers to the value for the first year of retirement).</p>
<p><strong>Result 2:</strong> Corpus required with 100% income flooring (single monthly annuity = monthly expenses in the first year of retirement): Rs. 13.08 Crores. <strong>Withdrawal rate: 2.49%</strong></p>
<p><strong>Result 3:</strong> Corpus required with 100% income flooring (single monthly annuity = monthly expenses in the first year of retirement): Rs. 25.40 Crores. <strong>Withdrawal rate: 1.28%</strong></p>
<p>This is an example. The steps can be altered as desired via the inputs in the robo tool.</p>

<p>Most people reading this would say this is an unachievable corpus. Yes, that is how it would seem when you get started. As your corpus grows, so will your confidence in building stronger moats for your retirement castle. So aim for result one, and then as the years pass, you can modify your retirement plan.</p>
<p>In summary, please do not fixate on any particular SWR. Focus on investing as much as possible for retirement and plan to combat returns risk sequences first in the initial years of retirement and later beyond. As your wealth grows, so will your perspective.</p>
<p>The post <a href="https://freefincal.com/what-withdrawal-rate-do-you-recommend-for-retirement-planning/">What withdrawal rate do you recommend for retirement planning?</a> appeared first on <a href="https://freefincal.com">freefincal</a>.</p>
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