Retire at 60, broke at 70? A planner explains why 3% withdrawal is the new survival strategy

A 3% withdrawal rate may sound cautious but in India, it’s the line between lasting wealth and going broke. And as one Chennai-based planner warns, retiring into a bear market can wreck even a well-built portfolio.

Financial planner D Muthukrishnan recently highlighted on X how early market losses in retirement can devastate savings—even if long-term returns average out. Citing data from The Ken, he pointed to a model showing two retirees with identical portfolios of ₹1 crore, withdrawing ₹1 lakh annually over 10 years.

The key difference? Timing.

Portfolio A, which faced early negative returns, ran out of money by Year 10. Portfolio B, with early gains, still had ₹26.97 lakh left. Both earned the same average annual return of 3%, but sequence of returns risk made the outcome vastly different.

The concept is central to understanding SWR, or Safe Withdrawal Rate—the annual amount retirees can pull from savings without running out of funds. In India, the SWR is pegged at 3%, far more conservative than Western benchmarks, due to inflation and shorter market history.

This is why planners suggest 3% as the safe limit. If your early retirement years coincide with a bear market, fixed withdrawals can drain your savings much faster.

The solution? Drop the idea of fixed withdrawals. Instead, planners recommend dynamic withdrawal strategies:

• Cut back during down years
• Spend more only when the portfolio grows
• Use annuities for essentials, and bucket strategies for goals

The lesson is clear: the math works on paper, but the market doesn’t move on averages. For Indian retirees, flexibility isn't optional—it’s the difference between dignity and dependence.