Most retirement income plans fail not because returns are poor,
but because withdrawals happen at the worst possible time.
On paper, Systematic Withdrawal Plans (SWP) look perfect.
A well-built portfolio can generate steady monthly income, survive for decades, and even leave a large corpus behind. Retirement calculators prove this again and again.
Yet in real life, many retirees panic during market falls, stop withdrawals, or sell growth assets at depressed prices. The result is not just lower returns — it is permanent damage to financial freedom.
The core issue is this:
Retirement planning changes the moment cash flows start.
During accumulation, volatility helps investors.
During withdrawal, the same volatility becomes dangerous — especially in the first few years of retirement.
Most SWP strategies treat the portfolio as one single pool of money, withdrawing the same way regardless of whether markets are rising, falling, or going sideways. This ignores market phases, investor behaviour, and the psychological stress of selling during drawdowns.
This is where the concept of SQUIRRELING™ comes in.
SQUIRRELING™ is not about timing the market or chasing returns.
It is a framework to decide from where to withdraw money — based on market conditions — so that income continues without forcing bad decisions.
By using a bucketed portfolio structure and adjusting the source of withdrawals instead of constantly reshuffling investments, SQUIRRELING™ aims to protect compounding, reduce emotional stress, and bring control back to retirees.
This article explains:
-
Why SWP fails in real life
-
Why market phase matters more than average returns
-
And how to decide which bucket to withdraw from, and when
When should SWP come from Bucket 1, Bucket 2, or Bucket 3?
There is no single fixed rule.
It depends on market phase, valuations, and momentum.
Below is a practical framework to think about it.
1️⃣ STRONG BULL MARKET (Optimism is high)
Characteristics:
-
Markets making new highs
-
Strong momentum (higher highs, higher lows)
-
Past returns are well above long-term averages
-
Valuations stretched, optimism everywhere
What most people do:
Get very confident about SWP.
What SQUIRRELING™ suggests:
-
You can run SWP partially from Bucket 3 (Equity)
-
But do NOT move large lump sums
-
Let SWP itself act as profit collection
👉 Equity → Stability → Income (gradual flow)
Why:
These are times when markets are giving excess returns, and excess returns should be collected, not assumed to be permanent.
⚠️ Only attempt this if you understand market momentum and valuations. Otherwise, stay conservative.
2️⃣ SIDEWAYS / RANGE-BOUND MARKET (Unclear direction)
Characteristics:
-
No new long-term highs
-
No deep falls either
-
Mixed signals, average valuations
-
Returns exist, but not exciting
Best SWP source:
👉 Bucket 2 (Stability / Hybrid)
Why this works:
-
You avoid touching equity unnecessarily
-
You give Bucket 3 more time to compound
-
You don’t overuse the safety bucket
This phase is about patience, not optimisation.
🔴 3️⃣ BEAR MARKET / STRESSED MARKET (Fear is high)
Characteristics:
-
Markets making lower lows
-
Negative or weak trailing returns
-
Valuations below average
-
Headlines are pessimistic
Golden rule:
👉 DO NOT run SWP from Bucket 2 or Bucket 3
SWP must come ONLY from:
👉 Bucket 1 (Income / Low-risk funds)
Why:
-
These are the best times to accumulate equity
-
Selling equity here permanently damages future compounding
-
Survival matters more than optimisation
🐿️ SQUIRRELING™ principle:
In bad markets, protect time.
In good markets, collect excess.
🧠 IMPORTANT CLARITY (Tax & Rebalancing)
Depending on where SWP runs from, capital gains tax may apply.
But remember:
-
A small tax paid deliberately is better than
-
A large loss caused by forced selling
SQUIRRELING™ reduces unnecessary movement by changing the SWP source, not constantly reshuffling the portfolio.
🔁 SIMPLE SUMMARY
-
Bull market:
SWP can partially come from Equity (if you understand momentum) -
Sideways market:
SWP from Stability / Hybrid (Bucket 2) -
Bear market:
SWP only from Income bucket (Bucket 1)
SWP is not about timing the market.
It’s about respecting market phases.”
⚠️ DISCLAIMER
This article is intended for educational and informational purposes only and should not be construed as investment advice, recommendation, or solicitation to buy or sell any financial product or mutual fund scheme.
All examples, return assumptions, market phases, and strategies discussed (including SWP, bucket strategy, and SQUIRRELING™) are illustrative in nature. Actual market returns, portfolio performance, and outcomes may vary based on market conditions, fund selection, taxation, and individual investor circumstances.
Investments in mutual funds are subject to market risks, including the possible loss of principal. Past performance is not indicative of future results. Investors should read all scheme-related documents carefully before investing.
Tax implications vary based on individual tax laws, holding periods, and regulatory changes. Readers are advised to consult a qualified financial advisor or tax professional before implementing any investment or withdrawal strategy.
The author is an AMFI-registered Mutual Fund Distributor (MFD), and the views expressed are personal and educational in nature.
