Safe Withdrawal Rate: How Much Can You Withdraw Monthly?
Learn the 4% rule and how to calculate a sustainable withdrawal rate for your retirement corpus. Understand how much you can safely withdraw without running out of money.
You've built a retirement corpus. Now comes the harder question: how much can you withdraw each month without running out of money?
Withdraw too much, and you'll exhaust your corpus. Withdraw too little, and you'll live unnecessarily frugally. The safe withdrawal rate (SWR) helps you find the balance.
What is Safe Withdrawal Rate?
The safe withdrawal rate is the percentage of your corpus you can withdraw annually while ensuring your money lasts through retirement.
| Concept | Definition |
|---|---|
| Withdrawal rate | Annual withdrawal ÷ Initial corpus |
| Safe rate | Rate that doesn't exhaust corpus prematurely |
| Sequence risk | Risk of poor returns early in retirement |
Plan your retirement withdrawals: Use our SWP Calculator to simulate different scenarios.
The 4% Rule Explained
Origin: The Trinity Study
In 1998, researchers at Trinity University analyzed 70 years of US market data (1926-1995) and found:
| Withdrawal Rate | Portfolio Success (30 years) |
|---|---|
| 3% | 100% |
| 4% | 95% |
| 5% | 85% |
| 6% | 70% |
| 7% | 55% |
The 4% rule: Withdraw 4% of your corpus in year 1, then adjust for inflation each year.
How the 4% Rule Works
Initial corpus: ₹1 crore
| Year | Withdrawal (6% inflation adj.) | Remaining Corpus (8% growth) |
|---|---|---|
| 1 | ₹4,00,000 | ₹1,03,68,000 |
| 5 | ₹5,05,000 | ₹1,11,50,000 |
| 10 | ₹6,76,000 | ₹1,15,20,000 |
| 15 | ₹9,04,000 | ₹1,08,30,000 |
| 20 | ₹12,10,000 | ₹82,50,000 |
| 25 | ₹16,18,000 | ₹28,40,000 |
| 30 | ₹21,65,000 | ₹0 (exhausted) |
At 4% initial withdrawal with 6% inflation, corpus lasts ~28-30 years.
Why 4% May Not Work for India
Higher Inflation
| Country | Long-term Inflation | Safe Rate Impact |
|---|---|---|
| USA | 2-3% | 4% works |
| India | 5-7% | Need lower rate |
Indian retirees face inflation 2-3% higher than US, requiring faster withdrawal increases.
Different Return Expectations
| Asset Class | US Returns | India Returns |
|---|---|---|
| Equity | 10% | 12% |
| Bonds | 5% | 7% |
| Inflation | 2.5% | 6% |
| Real return | 5-6% | 4-5% |
Despite higher nominal returns, real returns in India are similar or lower.
Longer Retirement Periods
| Retirement Age | Life Expectancy | Retirement Years |
|---|---|---|
| 60 | 85 | 25 years |
| 55 (early) | 85 | 30 years |
| 50 (FIRE) | 85 | 35 years |
| 45 (lean FIRE) | 85 | 40 years |
Early retirees need their corpus to last 35-40 years, not the 30 assumed by the 4% rule.
Safe Withdrawal Rates for India
Conservative Estimates
| Retirement Duration | Recommended SWR | Monthly from ₹1 Cr |
|---|---|---|
| 25 years | 3.5-4% | ₹29,000-33,000 |
| 30 years | 3-3.5% | ₹25,000-29,000 |
| 35 years | 2.5-3% | ₹21,000-25,000 |
| 40 years | 2-2.5% | ₹17,000-21,000 |
What These Rates Mean
₹1 crore corpus with 3% SWR:
- Year 1 withdrawal: ₹3 lakh (₹25,000/month)
- Year 10 (with 6% inflation increase): ₹5.4 lakh (₹45,000/month)
- Year 20: ₹9.6 lakh (₹80,000/month)
Your monthly withdrawal grows, but purchasing power stays constant.
The Bucket Strategy
Instead of a single withdrawal rate, use buckets for different time horizons:
Three-Bucket System
| Bucket | Horizon | Allocation | Investment |
|---|---|---|---|
| 1: Immediate | 0-3 years | 15-20% | Liquid funds, FD |
| 2: Medium | 3-7 years | 25-30% | Debt funds, bonds |
| 3: Long-term | 7+ years | 50-60% | Equity funds |
How It Works
₹1.5 crore corpus:
| Bucket | Amount | Purpose |
|---|---|---|
| Bucket 1 | ₹25 L | 3 years expenses (₹70K/month) |
| Bucket 2 | ₹40 L | Refills Bucket 1 |
| Bucket 3 | ₹85 L | Growth (refills Bucket 2) |
Refill rules:
- Spend from Bucket 1 monthly
- Annually, transfer from Bucket 2 to 1
- When markets are up 15%+, transfer from Bucket 3 to 2
- During crashes, don't touch Bucket 3
This protects against sequence of returns risk.
Calculating Your Required Corpus
Reverse Calculation
| Monthly Need | Annual Need | Corpus at 3% SWR | Corpus at 4% SWR |
|---|---|---|---|
| ₹50,000 | ₹6 L | ₹2 Cr | ₹1.5 Cr |
| ₹75,000 | ₹9 L | ₹3 Cr | ₹2.25 Cr |
| ₹1,00,000 | ₹12 L | ₹4 Cr | ₹3 Cr |
| ₹1,50,000 | ₹18 L | ₹6 Cr | ₹4.5 Cr |
| ₹2,00,000 | ₹24 L | ₹8 Cr | ₹6 Cr |
Formula: Required Corpus = Annual Expenses ÷ Safe Withdrawal Rate
Accounting for Other Income
| Income Source | Monthly | Annual | Reduces Corpus Need By |
|---|---|---|---|
| Pension | ₹30,000 | ₹3.6 L | ₹1.2 Cr (at 3%) |
| Rental income | ₹20,000 | ₹2.4 L | ₹80 L (at 3%) |
| Part-time work | ₹25,000 | ₹3 L | ₹1 Cr (at 3%) |
Example: Need ₹1 L/month, have ₹30K pension
- Net need from corpus: ₹70,000/month = ₹8.4 L/year
- Required corpus at 3%: ₹2.8 Cr (not ₹4 Cr)
Dynamic Withdrawal Strategies
The Guardrails Method
Adjust withdrawal based on portfolio performance:
| Portfolio Change | Withdrawal Adjustment |
|---|---|
| Up > 25% from start | Increase by 10% |
| Down > 15% from start | Decrease by 10% |
| Within range | No change |
Example:
- Year 1: ₹1 Cr corpus, withdraw ₹4 L
- Year 2: Portfolio at ₹1.3 Cr (+30%) → withdraw ₹4.4 L
- Year 3: Portfolio at ₹95 L (-27% from peak) → withdraw ₹3.96 L
The Floor-and-Ceiling Method
| Type | Rule | Purpose |
|---|---|---|
| Floor | Minimum 3% withdrawal | Prevents over-saving |
| Ceiling | Maximum 5% withdrawal | Prevents over-spending |
| Target | 4% adjusted for inflation | Normal years |
This allows flexibility while preventing extremes.
Withdrawal Rate by Asset Allocation
Your asset allocation affects sustainable withdrawal rate:
| Equity Allocation | Bond Allocation | Safe Withdrawal Rate |
|---|---|---|
| 100% | 0% | 3.5% (high volatility) |
| 75% | 25% | 4% |
| 60% | 40% | 4% (optimal) |
| 40% | 60% | 3.5% |
| 20% | 80% | 3% |
| 0% | 100% | 2.5% (inflation risk) |
Sweet spot: 50-70% equity often provides best sustainable withdrawal rate.
Sequence of Returns Risk
The order of returns matters as much as average returns.
Two Scenarios (Same Average Return)
Scenario A: Good returns early
| Year | Return | Withdrawal | End Balance |
|---|---|---|---|
| 1 | +20% | ₹4 L | ₹1.16 Cr |
| 2 | +15% | ₹4.24 L | ₹1.29 Cr |
| 3 | -10% | ₹4.49 L | ₹1.12 Cr |
| 4 | -15% | ₹4.76 L | ₹90 L |
| 5 | +5% | ₹5.05 L | ₹89 L |
Scenario B: Bad returns early
| Year | Return | Withdrawal | End Balance |
|---|---|---|---|
| 1 | -15% | ₹4 L | ₹81 L |
| 2 | -10% | ₹4.24 L | ₹68.5 L |
| 3 | +5% | ₹4.49 L | ₹67.4 L |
| 4 | +15% | ₹4.76 L | ₹72.8 L |
| 5 | +20% | ₹5.05 L | ₹82.3 L |
Same average return (3%), but Scenario B has ₹7 L less after 5 years. Over 25+ years, this compounds dramatically.
Protecting Against Sequence Risk
| Strategy | How It Helps |
|---|---|
| Lower withdrawal rate | More buffer for bad years |
| Bucket strategy | Don't sell equities in downturns |
| Flexible spending | Cut discretionary in bad years |
| Part-time income | Reduce withdrawals early |
Practical Withdrawal Implementation
Monthly SWP Setup
| Corpus | Annual Withdrawal (3.5%) | Monthly SWP |
|---|---|---|
| ₹1 Cr | ₹3.5 L | ₹29,167 |
| ₹2 Cr | ₹7 L | ₹58,333 |
| ₹3 Cr | ₹10.5 L | ₹87,500 |
Annual Review Checklist
| Check | Action |
|---|---|
| Portfolio value | Recalculate withdrawal rate |
| Inflation | Adjust monthly withdrawal |
| Expenses | Review if needs changed |
| Returns | Consider guardrail adjustments |
Real-World Scenarios
Scenario 1: Conservative Retiree (Age 60)
| Factor | Value |
|---|---|
| Corpus | ₹2 Cr |
| Monthly need | ₹60,000 |
| Pension | ₹20,000 |
| Net need | ₹40,000 |
| Withdrawal rate | 2.4% (very safe) |
| Expected duration | 25+ years |
Assessment: Extremely safe. Could increase lifestyle or leave legacy.
Scenario 2: Early Retiree (Age 50)
| Factor | Value |
|---|---|
| Corpus | ₹3 Cr |
| Monthly need | ₹1,00,000 |
| Other income | None |
| Withdrawal rate | 4% |
| Expected duration | 35+ years |
Assessment: Risky for 35+ years. Options:
- Reduce expenses to ₹75K (3% rate)
- Work part-time for 5 years
- Use dynamic withdrawal strategy
Scenario 3: FIRE Aspirant (Age 45)
| Factor | Value |
|---|---|
| Target corpus | ₹5 Cr |
| Monthly need | ₹1,25,000 |
| Target rate | 3% |
| Duration | 40+ years |
Assessment: 3% is appropriate for 40+ year retirement. May need:
- Coast FIRE (part-time work early)
- Barista FIRE (minimal work for healthcare)
- Geographic arbitrage (lower cost location)
Common Mistakes
1. Using 4% Without Adjustment
The 4% rule was based on US data with 2% inflation. For India:
- Use 3-3.5% for 30+ year retirements
- Adjust annually for actual inflation (not assumed)
2. Ignoring Healthcare Costs
| Age | Healthcare as % of Expenses |
|---|---|
| 60-70 | 5-10% |
| 70-80 | 15-25% |
| 80+ | 25-40% |
Build in higher healthcare allocation as you age.
3. Not Having Emergency Buffer
Keep 1-2 years expenses in liquid funds outside your main corpus. This prevents forced selling during market downturns.
4. Forgetting About Taxes
| Investment | Tax on Withdrawal |
|---|---|
| Equity funds | 12.5% LTCG above ₹1.25 L |
| Debt funds | Slab rate |
| PPF | Tax-free |
| NPS | 60% tax-free, 40% annuity taxed |
Factor in post-tax withdrawals when planning.
Conclusion
| Retirement Length | Recommended SWR | Strategy |
|---|---|---|
| 20-25 years | 4% | Standard 4% rule |
| 25-30 years | 3.5% | Slightly conservative |
| 30-35 years | 3% | Conservative + buckets |
| 35+ years | 2.5-3% | Dynamic + part-time work |
Key takeaways:
- Start with 3-3.5% for Indian conditions
- Use bucket strategy to manage sequence risk
- Stay flexible—adjust based on portfolio performance
- Include all income sources (pension, rental, part-time)
- Review annually and adjust
The goal isn't to die with zero or leave millions—it's to have enough throughout retirement without unnecessary anxiety.
Plan your retirement withdrawals: Use our SWP Calculator to simulate different withdrawal scenarios for your corpus.