Safe withdrawal rate — why 4% may not work in India
Where the 4% rule came from, what Indian data says instead, and how to make a retirement corpus last 30 to 45 years.
You’ve built a corpus. Now the question flips: how much can you take out each year without running out? That percentage, taken in year one and then raised with inflation every year, is your withdrawal rate. The highest one that reliably lasts is your safe withdrawal rate (SWR).
Where the 4% rule came from
In 1994 the US financial planner William Bengen tested historical US market returns and found that withdrawing 4% in the first year, then adjusting for inflation, survived every 30-year period he studied. The Trinity study (1998) reached a similar answer. “Retire on 25× your expenses” comes from here.
But it rests on US data, US inflation and 30-year retirements.
What Indian data says
A 2024 study of Indian markets by Rajan Raju and Ravi Saraogi (Balancing Acts: Safe withdrawal rates in the Indian context), using data from 2000 to 2023, found:
- An all-fixed-deposit portfolio supported a withdrawal rate below 2%. It simply didn’t beat inflation.
- Adding equity helped, with roughly 40% equity giving the best result of about 3%.
- Their recommendation: 3–3.5%, nearer 3% unless you can cut spending in bad years.
Higher inflation is the main reason. Withdrawals grow faster, so the corpus has to work harder.
Try it yourself
Two things jump out:
- Time matters enormously. A rate that’s comfortable for 30 years can be risky for 45. Early retirees need a lower rate.
- Every half-percent counts. Going from 4% to 3.5% often adds a lot of safety.
Sequence risk: the hidden danger
Two retirees can earn the same average return and get completely different outcomes. If markets crash in the first few years while you’re withdrawing, you sell more units at low prices, and the damage is permanent. If the crash comes later, the corpus has already grown and can absorb it.
That’s why a mix of equity and debt usually gives a higher safe rate than either alone. Debt pays the bills while equity recovers.
Ways to stretch your corpus
- Keep 2–3 years of expenses in debt or FDs so you never sell equity in a crash.
- Be flexible. Skip the inflation raise in a bad year, or trim spending 10% when markets fall sharply. Small flexibility raises the safe rate meaningfully.
- Earn a little. Even part-time income in your 40s and 50s greatly reduces withdrawals.
- Delay big fixed costs. Clear loans before you retire.
How Zarth’s simulator works
The withdrawal simulator runs 2,000 possible retirements. Each year draws a random equity return, debt return and inflation rate around your assumptions, withdraws your inflation-adjusted amount, and rebalances. It counts how many retirements never run out of money.
It’s pre-tax, and real markets have fatter tails than a bell curve, so treat a 95% result as “good”, not “guaranteed”.