A reader asks, “What Is the Safe Spending Limit for a ₹1 Crore Retirement Corpus?” In other words, if my retirement corpus is Rs. one Crore, what should be the maximum (initial) expenses so that I can draw an inflation-indexed income?
Naturally, there is no universal answer as it depends on years in retirement, inflation and return assumptions. But let us play along for a particular set of assumptions using the freefincal robo advisor tool.
Let us consider a 55-year-old (assume the spouse is also 55 for simplicity) who is about to retire and expects to live to age 90.
- Inflation in retirement is 6%
- 11% post-tax return from equity
- 7% post-tax income from fixed income (both return estimates are probably a bit adventurous, but let us run with it)
How to deploy the corpus
Assign 5% of the corpus (Rs. 5 Lakhs) to an emergency bucket.
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The remaining corps are divided as
| Bucket | Tenure (Y) | Amount |
| Income | 15 | 53,71,020 |
| Low Risk | 10 | 26,04,195 |
| Medium Risk | 5 | 9,49,203 |
| High Risk | 5 | 5,72,603 |
- The income bucket provides guaranteed inflation-protected income for the first 15 years in retirement.
- The low-risk bucket grows for 15Y and provides income for the next 10Y in retirement.
- The medium-risk bucket grows for 25Y, provides income for the next 5Y, and the high-risk bucket for the last 5Y after growing for 30Y.
One can actively manage the buckets according to annual returns or market conditions, or use hybrid funds to minimise churn. See: Using hybrid funds to build a retirement bucket strategy
| Bucket | Corpus weight (excl emergency fund) | Equity Weight (within each bucket) |
| income bucket | 57% | 0% |
| Low Risk | 27% | 40% |
| Medium Risk | 10% | 50% |
| High Risk | 6% | 100% |
Note that the overall equity allocation (excluding the emergency fund) is only 22%.
So now, What Is the Safe Spending Limit for a ₹1 Crore Retirement Corpus?
Monthly expenses not more than Rs. 27,900! Or an annual expense of Rs. 3.34L in the first year of retirement, corresponding to an initial withdrawal rate of 3.34%
Any expenses higher than this will entail taking on more risks, and it is not advisable for a corpus of only Rs. 1 Crore.
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