Make your retirement portfolio last longer, withdraw funds conservatively

A recent study suggests a withdrawal rate of 3-3.5%, but financial advisors suggest erring on the side of caution

Retirement planning is typically done assuming steady returns. Financial advisors and calculators usually assume an average annual return of, say, 12 per cent. But in reality, returns fluctuate greatly from year to year. Such variability can deplete the retirement corpus much sooner than planned for.

The “sequence of return” risk highlights the fact that besides the quantum of returns, the order in which those returns come is equally critical.

The Covid-19 market crash, for instance, severely affected retirees’ portfolios. Retirees kept withdrawing funds during the downturn. Those withdrawals depleted their portfolios further. The traditional approach, based on constant returns and inflation rates,