A 60-year-old retires with Rs 1.5 crore earning 8.5% and withdraws Rs 90,000 a month, rising 6% a year. How long does the money last, and how much sooner does it run out if the first two years return minus 15% and minus 5%?

On steady returns the money lasts about 17.3 years, to age 77; with two bad opening years it lasts about 11.5, to 72, nearly six years less. The same two bad years at 73 and 74 cost only about a year. Even the steady case runs out too early for a 60-year-old, so the plan needs a lower starting withdrawal, about Rs 60,000 a month lasts thirty years, and two years of spending held outside equity.

Start with the withdrawal rate. Rs 90,000 a month is Rs 10.8 lakh a year, 7.2% of the corpus, rising 6% a year, against an 8.5% return. The real return, 8.5% less 6% of rising spending, is only about 2.4%, so a 7.2% starting withdrawal must eat into capital. Running the months through, the corpus barely grows for the first few years, peaks around Rs 153 lakh, then falls faster and faster as withdrawals compound. It is exhausted after about 17.3 years, when Prakash is 77.

Picture selling your harvest in a year when prices have crashed, because you need to eat. You sell more sacks for the same cash, and those sacks are gone when prices recover. Losses during the withdrawal years force the sale of more units at low prices, so early losses shrink the base that every later year compounds on. This is sequence riskThe danger that the order of returns, not just their average, decides how long a portfolio lasts once withdrawals have started.. After minus 15% and minus 5%, the corpus is about Rs 101 lakh against Rs 152 lakh on the steady path, and the runway falls to 11.5 years.

Now move the same two bad years to ages 73 and 74. The runway is about 16.2 years, only about a year short of the steady case, because by then the corpus is smaller and fewer rupees are exposed. The average return over the period is almost identical in both cases; only the timing differs. That is why a retirement plan cannot be judged on its expected return alone.

First, the honest message: even the steady case runs out at about 77, and a 60-year-old should plan for thirty years. At these assumptions, a starting withdrawal of about Rs 60,000 a month, rising 6% a year, lasts thirty years on steady returns. If he cannot live on that, the gap has to come from somewhere: part-time income for a few years, a smaller step-up, or using the house later.

Second, protect the first years against sequence risk. Hold about two years of withdrawals in liquid and short-term debt funds, refilled from the portfolio in good years, so a bad equity year never forces a sale. And agree a rule in advance: after a year below minus 5%, skip that year's step-up. The 8.5% and 6% are assumptions, not forecasts, so rerun the plan every year with actual numbers.