Retirement disaster waiting? Wealth advisor’s warning to India’s middle-class seniors

Even with decades of disciplined saving and “good” investments, many retirees still outlive their money. Wealth advisor Milind Deogaonkar says the culprit is often overlooked — a hidden threat called sequence risk.

In a LinkedIn post, Deogaonkar warns that most retirement plans fail not due to poor choices or insufficient savings, but because of bad timing. “Most people plan for average returns. Very few plan for bad timing,” he wrote.

To explain, he lays out a stark example. Two retirees — A and B — start with identical ₹1 crore portfolios, withdraw ₹5 lakh annually, and earn the same average return over 20 years. But Retiree A runs out of money at 75, while Retiree B still has funds at 90.

The difference? Market performance in the early years of retirement. “If the market crashes in your first two or three years and you’re still withdrawing regularly, you’re not just spending — you’re selling investments at a loss,” Deogaonkar explains. “That reduces your capital base just when you need it to recover.”

This phenomenon — known as sequence-of-returns risk — can quietly devastate a portfolio, even if long-term market averages look favorable.

To combat this, Deogaonkar outlines four practical strategies:

• Bucket Strategy: Hold 1–2 years of living expenses in safe, low-volatility instruments like liquid or short-term debt funds. This allows retirees to avoid selling equity during market dips.
• Rebalancing Discipline: Regularly adjust asset allocations. Selling outperformers and buying underperformers helps lock in gains and manage risk.
• Flexible Withdrawals: Reduce or pause withdrawals in bad market years. “If the market’s down, can you skip or lower a withdrawal that year?” he asks.
• Guaranteed Income for Essentials: Use products like annuities or LIC plans to ensure that basic living costs are met regardless of market conditions.

Deogaonkar urges those in their 50s and 60s to take sequence risk seriously. “Retirement isn’t about beating the market. It’s about protecting your lifestyle,” he said.

His message is clear: even with a solid corpus and average returns, ignoring early-retirement volatility can spell financial ruin.