How market crash can impact your retirement corpus
Retirement corpus value when market falls 10%, 20%and 30% (As per Nehal Mota)
Corpus
10% fall
20% fall
30% fall
₹1 crore
₹1,00,00,000 × (1 – 0.10) = ₹90,00,000
₹1,00,00,000 × (1 – 0.20) = ₹80,00,000
₹1,00,00,000 × (1 – 0.30) = ₹70,00,000
₹2 crores
₹2,00,00,000 × (1 – 0.10) = ₹1.8 crore
₹2,00,00,000 × (1 – 0.20) = ₹1.6 crore
₹2,00,00,000 × (1 – 0.30) = ₹1.4 crore
Gain required to recover the loss (in %)
11%
25%
43%
What should an investor do to avoid the impact of market crash on retirement corpus?
Retirement investment strategy explained (as per Vinayak Magotra)
Strategy / Approach
Time Horizon
Asset Allocation
Key Objective
Key Feature
Bucket Strategy – Short-term
2–3 years
Safe & liquid funds
Protect immediate expenses from market volatility
Stability and liquidity
Bucket Strategy – Medium-term
Next few years
Relatively stable investments
Balance risk and returns
Moderate risk exposure
Bucket Strategy – Long-term
Long-term
Equities
Higher growth potential
Higher risk, higher returns
Glide Path / Life Cycle Funds (SEBI)
Entire lifecycle
Starts with high equity, shifts to debt over time
Reduce risk as retirement nears
Automated, disciplined investing
Gradual Equity Reduction
Pre-retirement phase
Decreasing equity, increasing debt
Lower portfolio risk over time
Investor-driven adjustments
Component / Strategy
Time Horizon
Asset Allocation
Purpose
Key Benefit
Short-term bucket
2–5 years
Liquid funds / Fixed deposits (low-risk)
Cover immediate expenses
Protects against market volatility
Medium-term bucket
5–7 years
Hybrid funds
Balance risk and returns
Provides stability with some growth
Long-term bucket
Long-term
Equities
Long-term growth
Higher return potential
Dynamic asset allocation
Ongoing
Flexible mix of equity & debt
Adjust portfolio based on market conditions
Reduces volatility impact
Flexible withdrawal strategy
During downturns
Use debt portion for withdrawals
Avoid selling equities in falling markets
Prevents losses
Safety buffer
2–3 years
Safe assets
Emergency/near-term expenses
Ensures liquidity and stability
Asset allocation for retirement portfolio
Rebalancing of retirement portfolio is necessary
Mistakes to avoid while creatin a creating crash-proof retirement corpus
Aspect / Theme
Nehal Mota
Vinayak Magotra
Equity exposure
Avoid high equity allocation near retirement
Ensure portfolio avoids forced equity selling during downturns
Liquidity planning
Do not ignore liquidity needs
Proper structuring prevents distress selling
Withdrawal strategy
Avoid rigid withdrawal approach
Stay invested; don’t react impulsively
Market behaviour
Timing of returns matters more than average returns
Market falls are temporary; avoid panic selling
Investor behaviour
Focus on discipline and resilience, not risk elimination
Avoid emotional decisions during volatility
Investment approach
Use allocation, liquidity, and rebalancing for stability
Do not abandon long-term strategy midway
If the market takes a big hit, most investors panic, including those close to retirement. A Rs 2-crore equity-heavy retirement corpus can be reduced to just Rs 1.6 crore if the market falls by 30% before you retire. Often, market slumps last so long that you can’t just sit around, waiting for it to bounce back, especially when retirement is looming.So, what can you do? Can you make your retirement corpus crash-proof? Or at least something that can cushion the blow of market shocks enough so that your cashflow during the retirement phase isn’t affected by the market fall?Vinayak Magotra, product head & founding team, Centricity WealthTech, says that if you are looking to retire in a few years, it’s a good idea to start rebalancing your retirement portfolio at least 24 months ahead of your retirement date.“During this period, equity exposure can be gradually reduced in a staggered manner, typically through SWPs, to build a more stable debt portfolio,” Magotra explains.But what if you are retiring today and the market is yet to recover? Won’t your retirement corpus be hit badly? How will you ensure your monthly cashflow?Nehal Mota, co-founder & CEO, Finnovate, suggests bucket strategy as an effective way to manage this risk, allocating 3–5 years of expenses in low-risk instruments like liquid funds or fixed deposits.Mota reveals a market crash near retirement can significantly damage the corpus due to sequence of returns risk when negative returns occur just before or after retirement, and withdrawals begin simultaneously.“A 25–30% fall needs 35–45% gains to recover. Early withdrawals during a crash permanently erode wealth,” explains Mota.Mota says the concern is not just the market fall, but the reduced base from which withdrawals continue, making recovery difficult even if markets bounce back later.Magotra says the bucket strategy is a practical way to deal with this risk.He explains that his strategy involves dividing allocations by time; for immediate expenses, he suggests keeping 2-3 years of expenses in safer, more liquid funds to avoid being affected by market fluctuations.Shobhit Mathur, co-founder, Ionic Wealth, says the smarter approach is not chasing a ‘crash-proof’ strategy, but structuring your portfolio into time-based buckets, keeping 2–3 years of expenses in low-risk, liquid assets so that equities get time to recover, while staying diversified across equities, global exposure, gold, and income assets.Mota too recommends a bucket strategy, suggesting that you should have at least 2–3 years of expenses in safe assets. For 3–5 years of expenses, she advises using low-risk instruments like liquid funds or fixed deposits. For 5–7 years’ expenses, consider hybrid funds, and for the rest, invest in equities for long-term growth.If you want to retire today with Rs 1 crore retirement portfolio, what should be your asset allocation for a crash-proof portfolio?Mota suggests allocating 30% (Rs 30 lakh) in liquid or ultra-short-term instruments for immediate needs, 40% (Rs 40 lakh) in medium-to-long duration debt or hybrid funds for stability over the medium term, and 30% (Rs 30 lakh) in equity funds such as index or large-cap funds for long-term growth.“This structure ensures liquidity, stability, and growth, making the portfolio more resilient to market shocks,” predicts Mota.Magotra feels there cannot be a completely crash-proof portfolio and to generate meaningful long-term returns, some allocation to equities is necessary.He also says that the key lies in gradually tilting the portfolio towards debt at the right time, well before actual withdrawals begin from the retirement corpus. This shift helps reduce volatility and protects the portfolio as the goal approaches.“As part of this transition, the debt allocation can include high-quality bonds, arbitrage funds, and now even SIFs, depending on suitability and investor requirements,” says Magotra.Mathur suggests that a ‘crash-proof’ portfolio cannot be one-size-fits-all, as it must be designed around your risk profile, expected lifestyle expenses, and the inflation impacting those needs.According to his strategy, for a Rs 1-crore corpus, one can allocate roughly 50–70% to domestic equities for long-term growth, 15–25% to global equities for geographical diversification, 10–15% to precious metals like gold as a hedge during market stress and 10–30% to income-generating assets such as debt or fixed income for stability and cash flows.Even if your equity allocation for long-term growth is high, you need to rebalance your portfolio as retirement nears and you can shift your equities towards less-risky asset. But when is it the right time to rebalance your portfolio and what should be the percentage of assets you should shift?Mota believes it should be done annually or when allocations deviate by 5–10%.“During bull markets, trimming equity exposure and reallocating to debt helps lock in gains, while during corrections, shifting some funds back to equity enables participation in recovery,” Mota explains her strategy.Magotra is of view that rebalancing should ideally begin at least 24 months before the actual retirement date.Magotra suggests that during this period, equity exposure can be gradually reduced in a staggered manner, typically through SWPs, to build a more stable debt portfolio.“The approach would also depend on the expected withdrawals from the retirement corpus, while factoring in aspects like taxation, exit loads, and overall cash flow requirements,” says Magotra.