Retirement funds: Why retirees shouldn’t rely 100% on equity – expert on how to balance risk

Many investors dream of retiring with a fully equity-based portfolio, hoping to ride the long-term growth of stocks without worrying about bonds or debt instruments. But Dhirendra Kumar, CEO of Value Research, cautioned that even in retirement, a pure equity allocation comes with significant risks.

“100% equity really means no fixed income at all,” Kumar said in a podcast on YouTube. “All your financial holdings are in stocks, equity funds, or index funds. Even if you have instruments like your provident fund, people often mentally exclude them when calculating risk. Retirement planning requires looking at your financial investments holistically.”

The reason debt is recommended—even in retirement—is straightforward: equities are volatile. Market swings create opportunities, but without a fixed income buffer, you may be forced to sell stocks at a loss or miss the chance to capitalize on market dips. “Equities will scare you sometimes, and that’s when they become most valuable. If you don’t have debt or a fixed income, you can’t seize those opportunities,” Kumar says.

How much fixed income a retiree needs depends on their circumstances. Kumar cites a common question from a 66-year-old with a pension and rental income who asked why he should hold debt at all. Surprisingly, many retirees are in similar situations, yet most still keep some fixed income as a safety net. “It’s a function of scale,” Kumar notes. “If your financial assets can comfortably cover your withdrawal needs, you may tolerate higher equity. But even then, some allocation to debt is prudent.”

For most retirees, Kumar suggests keeping at least 20–30% in fixed income, especially if relying on a 5% annual withdrawal rate. This buffer prevents panic during market downturns and allows for structured, disciplined rebalancing. “If you’ve accounted for emergencies and other income streams, you could theoretically go 100% equity. But I still prefer moderating it—80% equity and 20% fixed income—to capitalize on special situations without emotional stress,” he explains.

Kumar emphasizes that this is not “timing the market” in the speculative sense. Instead, it’s disciplined asset allocation and systematic rebalancing, allowing retirees to make methodical withdrawals while capturing market opportunities. Monthly withdrawals via SWPs (Systematic Withdrawal Plans), adjusted annually, provide both flexibility and stability.

For investors less dependent on their portfolio for income, lower fixed-income allocations—15–20%—may suffice. But for those drawing regular retirement income, especially around a 5% withdrawal rate, a higher proportion—25–30%—is a safer guideline. These percentages are not rigid; they should be adapted based on individual risk tolerance, income stability, and financial scale.

Ultimately, Kumar’s advice underscores that retiring entirely on equities may work for some but requires careful planning, discipline, and contingency measures. By balancing equities with debt, retirees can protect against market volatility while still benefiting from long-term growth—a blend of opportunity and security that pure equities alone cannot guarantee.