At 45 my retirement corpus is 37X with 45% equity should I start decreasing equity exposure?

Published: May 2, 2023 at 6:00 am

Last Updated on May 2, 2023 at 8:17 am

A reader says, “You mention in multiple articles such as – How much equity should I hold after retirement? – An equity allocation of not more than 30% for typical retirements is recommended.”

“Can you write/update an article explaining if/how this 30% number would change based on someone’s current corpus (as a multiple of annual expenses in retirement), or expected corpus at retirement, or any other factor such as how close/ far away from FIRE someone is, etc.? My current corpus is 37X with equity: debt is 45:55. I plan to retire after ten years at age 55.”

“I have started moving my investments from equity to debt monthly, making it 30% equity at my planned retirement age. Is this the right time for me to start reducing equity, or should I continue investing in equity for another five years and reduce it in the last five years before retirement? Does my current corpus change the 30% guidance in my case?”

That 30% equity allocation after retirement is only a guideline/thumbrule. While our robo-advisory tool typically recommends a lower allocation, it can be (and must be) adjusted as per the circumstances of each retiree.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

For example, here is an illustration from the tool.

  • Current monthly expenses that will persist in retirement 1,00,000
  • Your age at the end of the current year is 45 (we will use the same for spouse here)
  • Age you wish to retire 55
  • Post-tax return expected from equity investments 10%
  • Post-tax return expected from current taxable fixed income 6%
  • Rate of return expected from current tax-free fixed income 7%
  • The assumed life expectancy of the younger spouse is 90
  • Inflation during retirement (%) 6
  • Years to retirement 10
  • Monthly expenses in the first year of retirement 1,96,715
  • Years in retirement (until younger spouse reaches age 90) 35
  • Corpus required: Rs. 6,97,56,592
  • Overall post-retirement asset allocation recommended: 78% fixed income and 22% equity.
  • 54% of the total corpus is assumed to be used in a nearly risk-free income bucket to generate income for the first 15 years of retirement. This is to handle a poor sequence of returns from equity.
  • The remaining corpus is assumed to be distributed among low, medium, and high-risk buckets. About 50% of the chorus in these buckets will be in equity.

This is also only a guideline. Depending on the corpus available and the capital market experience of the retiree, the equity allocation can be suitably adjusted.

In the reader’s case, he has done well to accumulate 37X with ten years to go to retirement. The 45% equity exposure is also on the right side. We recommend a proper calculation with a bucket strategy; see, for example – A retirement plan review: Am I on track to retire by 50?

That said, assuming the 30% equity allocation post-retirement is a reasonable target,  a gradual reduction in equity allocation from now will offer some protection against rude market shocks between now and retirement and beyond.

There is no need to have a sense of FOMO (fear of missing out) about starting the equity reduction immediately, not five years from now. Safety first! Before that, repeat the retirement planning exercise with our robo tool or a SEBI-registered fee-only advisor from our list.

Ensure that you are investing enough for retirement now and can increase your investments in the coming years to offset the reduction in equity exposure.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)