The LCM (Lifestyle Comfort Multiple) approach recommends building a corpus of 25x your current annual expenses to secure a financially comfortable retirement.

1. Invest 10x in Debt
   • Debt investments (e.g., arbitrage funds, government bonds, fixed deposits) are expected to earn returns that match inflation.
   • This creates a 10-year buffer for covering your annual expenses, allowing your equity investments time to sail through market volatility.
2. Invest 15x in Equity
   • Equity investments offer higher growth potential over the long term but are volatile in the short term.
   • The 15x allocation ensures significant capital appreciation over time, outpacing inflation and building wealth.

The withdrawal rule is designed to protect equity investments during market volatility while ensuring steady income:

1. Withdraw from Debt
   • If equity returns (cumulatively since the last equity withdrawal) are less than 10%, withdraw from the debt portion.
   • This allows equity to recover from market dips without being depleted.
2. Withdraw from Equity
   • If equity returns exceed 10% cumulatively, withdraw from the equity portion.
   • This ensures gains from equity outperformance fund your expenses, preserving the debt allocation.

1. Stability and Liquidity with Debt
   • A 10x debt allocation provides steady returns close to inflation, covering 10 years of expenses.
   • This offers a reliable source of income during equity downturns.
2. Growth and Wealth Creation with Equity
   • A 15x equity allocation allows for long-term growth and compounding, offsetting inflation and building wealth.
   • The withdrawal rule ensures equity is given time to recover during market volatility.
3. Protects Against Market Timing Risks
   • By withdrawing from debt during equity underperformance, you avoid selling equities at low valuations.
   • This reduces the impact of market timing on your retirement corpus.

• Scenario 1: Equity underperforms (cumulative returns < 10%)
  
  1. Annual expenses: ₹10 lakh
  2. Withdraw ₹10 lakh from debt to allow equity to recover.
• Scenario 2: Equity outperforms (cumulative returns > 10%)
  
  1. Annual expenses: ₹10 lakh
  2. Withdraw ₹10 lakh from equity, preserving the debt portion.

Over time, this strategy balances the stability of debt with the growth potential of equity.

• Long-Term Security: The 25x corpus ensures sufficient funds to cover 25 years of expenses, even accounting for inflation.
• Flexibility: The dynamic withdrawal rule adapts to market performance, ensuring sustainable income.
• Peace of Mind: A structured approach minimizes the emotional stress of managing retirement finances.