Planning to retire with an equity-heavy portfolio? History warns against it.

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Subscribe to enjoy similar stories. The past few weeks have been tough for the Indian markets. While a 10% fall in indices isn’t unusual, the frequency of such falls has fallen significantly since the pandemic and as a result, new investors are learning lessons that old timers have known for years.

With that, let’s come to the topic at hand – retirement. Most people can’t choose when they will retire. I say this because while social media glorifies the FIRE (financial independence, retire early) movement, the reality for the vast majority is decades of work and retirement around 55-60.

This means choosing whether to retire in a bull market or a bear market is a luxury that is not available to most. Since markets move in cycles, some people will end up retiring in a bull market and others in a bear market. And of course, some in between.

Being aware of the ongoing cycle and how the market will look around your retirement date can go a long way in helping you plan for it more effectively. Also read: Plan to retain your Employees’ Provident Fund balance after retiring? Read this. Let’s consider a simple example.

Imagine it’s early 2008 and you are about to retire in a few months. Since the past few years have been great for equity markets, your confidence is sky-high and you decide to retire with a 75:25 equity:debt portfolio. Say your portfolio size is ₹2 crore, with ₹1.5 crore in equities and ₹50 lakh in debt.

You plan to withdraw ₹50,000 as monthly income at the start. Now we all know what happened in the 2008-09 financial crisis. Markets around the world crashed, and even ours were down 50-60%.