Why asset mix matters for retirees during market crashes

…may need to sell investments to fund monthly expenses. The five years around retirement deserve particular attention because of sequence-of-returns risk, says Akshat Garg, Head of Research & Product, Choice Wealth. “ The fundamental idea is simple: don’t make your lifestyle dependent on what the equity market does this year ,” Garg says. This is why retirement planning should not focus only on how much return the portfolio can generate but it also needs to consider when the money will be required, where those withdrawals will come from,…

…could continue meeting essential expenses from the debt bucket instead of selling equity at depressed prices. However, this does not mean the same withdrawal can continue indefinitely regardless of market conditions. “ If the correction lasts for long then blindly maintaining the same withdrawal can put additional pressure on the portfolio ,” Jain says. This is where spending flexibility becomes important. Garg suggests 3–4% of the initial corpus a year as a broad starting point for a well-diversified retirement portfolio, but says the appropriate rate…