Key idea
A famous rule of thumb for how much you can spend from a retirement pot each year without running out. A useful starting frame, with an Indian caveat.
Once you have a retirement corpus, a new question appears: how much can you withdraw each year without exhausting it? The best-known guideline is the 4% rule, drawn from US research: withdraw about 4% of your corpus in the first year, then adjust that amount for inflation each year after.
What it implies
A 4% withdrawal implies a corpus of roughly 25 times your first year's expenses.
So if you need ₹10 lakh a year in retirement, the rule suggests a corpus of around ₹2.5 crore. The idea is that a sensibly invested pot can sustain this rate over a long retirement, with the remaining corpus continuing to grow enough to keep up.
The important caveat for India
The 4% figure came from US markets and US inflation. Because inflation in India has historically been higher, many suggest a more conservative withdrawal rate (some say closer to 3 to 3.5%), implying a larger corpus, perhaps 30 times expenses or more. It is a framework to reason with, not a precise promise.
Use the rule to estimate the corpus a goal needs, then adjust for higher inflation and your own situation. It is a helpful starting point for thinking, not a guarantee, and your own numbers should guide the final call.
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