Two retirees, each with Rs 2 crore in savings, decided to withdraw Rs 1 lakh a month for the next 25 years. Surprisingly, The difference, explained CA Abhishek Walia, comes down to something called sequencing risk.
Walia wrote on LinkedIn, “Person A retired just as the market crashed. For the first five years, returns were negative. They kept withdrawing Rs 1 lakh every month. Even when markets recovered, the portfolio never bounced back fully.”
In contrast, he pointed out, “Person B retired in a bull market. The first five years gave strong returns. Their withdrawals hardly affected the portfolio, which grew enough to last decades.”
Even though both saw the same average return of 10% and had identical withdrawal plans, the order of returns made a huge difference. That’s sequencing risk in action.
So, how can retirees protect themselves? Walia suggests, “Keep 2–3 years of expenses in safe debt or liquid funds before retirement, follow a bucket plan: short-term needs in debt, long-term growth in equity and adjust withdrawals in bad years instead of sticking to a fixed number.”
He concluded his post by saying, “Retirement planning isn’t just about how much you save. It’s about making sure your money survives the bad years that come too soon.”