The word SWR or Standard Withdrawal Rates is not an Indian term – at least I have not seen any Indian website or magazine use it…It is a UK or US terminology…let us see what it means..

It is the amount of money that you should be able to withdraw comfortably from your Retirement corpus / Retirement portfolio till you are alive / till your dependent needs to withdraw. Normally I have found that a 6% post tax withdrawal rate in India is difficult to sustain, but a rate of about 4% is fine.

Based on this, I have a theory which has worked in 3 retirement portfolios – but the caveat is these 3 people had such a huge corpus (and well off kids to boot) that it was easy to experiment and implement.

Typically in 3 cases of retiree portfolio (one person is dead, but his widow is living on the current income) I transferred 5 years expenses to debt instruments – including PPF, bank fixed deposits, debt mutual funds, etc. All the other money continued to be in equities.

Let us take the case of a 64 year old man and his wife. He had a liquid net-worth (ok financial assets) of Rs. 1 crore. This had equity mutual funds, direct equities, bank fds, debt mutual funds, etc.His annual expenses were in the region of Rs. 2-3 lakhs a year…

I transferred Rs. 10 lakhs to debt instruments (3-4 years expenses) – predominantly debt funds (growth option) and some bank fixed deposits. He also had Rs. 16 lakhs in a public provident fund (more than 20 years account, so really liquid).

He has a dividend income of Rs. 2.2 lakhs on his equity (including a couple of mutual fund schemes), Rs. 2 lakhs from some debt instruments, so his total income is about Rs. 4.2 lakhs

and his annual expenses were in the range of Rs. 3 lakhs.

SO THERE WAS NO REASON TO DO A SWP from his debt mutual funds…which meant compounding is (was) going on uninterrupted.

His equity portfolio has gone up by about 60-70% over the past 2-3 years, dividends and interest income have been partially consumed. However in the whole exercise this 74 year old man’s equity content in the total portfolio has gone up far, far above what a typical planner would like to see!

I am very comfortable with this ratio – however I did pull out about 4-5 lakhs from his equity portfolio and put it in an income fund scheme. The logic really is (he agrees) is now he has enough money (to last his lifetime) in debt funds, ppf, and bank deposits. I would neither call this ‘market timing’ nor would I call it ‘tactical asset allocation’ – the process of shifting from equity to debt…just sold some high p/e stocks and shifted to cash. May still buy some equities if the prices are attractive.

Now his equity portfolio is taking a 50 year view – he is leaving it to his 10 year old granddaughter, not to his son! As a well wisher of this kid…I hope to create a Rs. 20 lakh dividend income for her by the time she is 25!

Lucky is the guy who marries her.

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  1. “His annual expenses were in the region of Rs. 2-3 lakhs a year”

    that is a frugal man in today’s world.he has probably moved out of a metro city in india

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