A few months before retirement, people often ask me the same thing. "My SIPs have been running for twenty years. What do I do with them now that the salary is stopping?" It's a good question, because the job your investments do changes completely at retirement. For decades, money went in every month. From now on, money has to come out, steadily, and it has to last a long time.
First, the SIP itself
A SIP is paid from your bank account, usually from salary. When the salary stops, there may be nothing to pay it from.
So most people stop or reduce their SIPs around retirement. That's normal. Nobody should feel they've failed by stopping. The important thing isn't the SIP. It's what you do with the money you've already built.
If you still have regular income, from a pension, rent or part-time work, and you won't need the money for years, continuing a smaller SIP can make sense. If not, stopping is fine.
Don't cash everything out
This is the biggest mistake I see.
Some people retire, redeem everything, and put it all in a bank deposit because it feels safe. Then prices keep rising for the next twenty-five years, and the money slowly loses its buying power. Our page on inflation and your savings explains why.
Think about that for a second, because it's the single fact that changes how the whole retirement plan should look: the money you have on your last working day doesn't need to last a few years, it needs to last as long as you do, through rising prices, rising medical bills and whatever else the next quarter of a century brings.
Retirement at sixty can mean living on your savings until eighty-five or beyond. Some of that money won't be needed for fifteen or twenty years. That part can still sit in equity.
Split your money by when you'll need it
Here's a simple way to think about it.
- Next two or three years: money for living expenses, kept somewhere steady like a liquid or short-term debt fund, or deposits.
- Years four to ten: a balanced mix, perhaps hybrid or conservative funds.
- Beyond ten years: some equity, for growth to keep up with rising costs.
As years pass, you move money from the long-term pot into the near-term one. Our page on asset allocation explains this idea.
Turn savings into a monthly income
This is where a systematic withdrawal plan, or SWP, helps. It works like a SIP in reverse. You choose an amount, and it's paid into your bank every month from your fund. The rest stays invested.
It feels like a salary, which many retired people find comforting. Our page on the systematic withdrawal plan explains how to set one up, and our page on SWP versus FD interest compares it with living on deposit interest.
How much to withdraw
This is the question that matters most, and there's no single number.
Withdraw too much and the money may run out too early. Withdraw too little and you live more tightly than you need to. I won't give you a percentage here, because it depends on your age, your other income, your health and how your investments are split.
Start low. Adjust later.
What I will say: be conservative in the early years. It's much easier to raise a withdrawal later than to cut it when you're eighty.
What about pension and other income?
If you get a pension, rent, or income from part-time work, count it first. Every rupee that comes in regularly is a rupee you don't need to withdraw from investments.
The gap between your monthly expenses and your regular income is what your withdrawals need to cover. Work that out before deciding how much to withdraw. For many people, the gap turns out smaller than they feared.
Plan for one partner living longer
Couples often plan retirement as if both will live the same length of time. Usually one partner outlives the other, sometimes by many years.
Make sure the plan works for the surviving partner too, with nominees correct and the money in a form they can manage. It's not a comfortable conversation, but it matters.
Keep a strong buffer
Health costs tend to rise in retirement. Keep a separate emergency buffer, apart from your monthly withdrawals, so a hospital bill doesn't force you to sell investments at a bad time. Our page on building an emergency fund covers this.
Be careful about lending your retirement money
Once retirement money arrives, relatives sometimes ask for loans, or suggest "safe" schemes that promise high monthly income.
Your retirement savings have one job: to support you for the rest of your life. Lending them out, or putting them into something you don't fully understand, puts that job at risk. It's okay to say no. Our post on families who lost money to schemes that weren't funds shows how often this goes wrong.
Simplify before you retire
Many people reach sixty with a dozen funds, several old folios and SIPs they've forgotten about. Retirement is a good time to simplify.
Fewer funds are easier to manage, easier to withdraw from, and much easier for your spouse or children to understand if they ever need to. Our page on how many funds to hold explains how to tidy up.
The first year is the hardest
Many people find the first year of retirement emotionally harder than they expected. No salary credit on the first of the month. A strange feeling watching the balance go down instead of up.
That's normal. Really. It helps to set the withdrawal plan up before the last working day, so the first "retirement salary" arrives on time and the routine feels familiar. Small things like that make a big difference.
Check the paperwork
- Nominees on every folio.
- Bank account current, since your salary account may change.
- KYC status valid, as our page on KYC status explains.
- Your spouse knows what exists and how to access it.
Mistakes I see most often
Taking everything out on the day of retirement. Putting it all in one place. Withdrawing too much in the first few years because it feels like a lot of money. Not having a separate buffer. And not telling the spouse where things are.
Every one of these is easy to avoid with a bit of planning a year or two before retirement. Start early. Start calm.
Review once a year
Retirement plans need a yearly check. Just like before.
Look at what you spent, what you withdrew, and how the pots are balanced. Move money from the long-term pot to the near-term one if needed. Adjust the withdrawal if prices have risen. Our page on how to review your portfolio gives a simple checklist.
A note for couples
If one partner has always handled the money, retirement is the time to share it fully. Sit together, go through every investment, and make sure both of you could manage alone. It's not a pleasant thought, but it's one of the kindest things you can do for each other.
So, what happens to your SIP?
The SIP usually stops or shrinks. The investments stay, split by when you'll need them. A withdrawal plan pays you a monthly amount. And the paperwork gets tidied so the family can manage later.
If you're approaching retirement and want help planning this change, I'm happy to sit with you and your spouse. Myfolios is an AMFI-registered mutual fund distributor (ARN-145870) working from Indore since 2014. Get in touch.
