Equity after 60: five myths about senior allocation

The common advice, and why it is incomplete

"No shares after retirement" is common advice in Indian families, and it comes from a real place: a retiree has no salary to wait out a crash. But the advice treats retirement as a short wait, when it is often a 25- to 30-year stretch. Over that long a period, the bigger risk is usually the money that never grows, not the money that falls for a while.

Here are five myths, checked against the NAV history of Indian mutual funds. All figures are medians for the Direct plan, Growth option, on NAVs to 1 October 2026.

Myth 1: "Equity is only for the young"

Equity is for long horizons, and age is only a rough proxy for horizon. A 60-year-old couple may need the corpus to last until the younger partner is 90. The money they will spend at 75 and 85 has a horizon of 15 to 25 years, longer than most 35-year-olds' house-purchase goals.

What matters is splitting the corpus by when each rupee will be spent, not by the owner's age. Money for the next two or three years goes in liquid or short-term debt. Money for years four to seven goes in conservative or balanced options. Only money for year eight onwards belongs in equity.

Myth 2: "A fall in equity is money lost for good"

A fall is lost only if you sell during it. Here is what equity and hybrid categories returned over ten years, among funds with a ten-year record:

Every one of the 22 large-cap funds with a ten-year record returned more than 10% a year. Two caveats: this covers only funds that still exist, so merged and closed weaker funds are missing, and ten years is one period, not a guarantee.

The same funds also show the cost of holding equity. The median large-cap fund's worst peak-to-trough fall in its Direct-plan history was −35.14%, and the worst within just the last three years was −16.44%. Over the past twelve months the median large-cap fund returned −4.71%. Equity pays more over long periods because it is uncomfortable over short ones.

Myth 3: "Fixed deposits and SCSS have no risk"

They have no price risk. They do have inflation risk. A fixed payout buys less every year. If household costs rise at 6% a year, an illustrative assumption, ₹50,000 of monthly spending becomes about ₹1 lakh in 12 years. A payout fixed at today's level would cover only half of it by then. You can test your own numbers on the inflation calculator.

Fixed-income products are the right home for the near-term part of a retiree's money, and the Senior Citizens' Savings Scheme in particular pays well. We compare it with funds in SCSS vs mutual funds for retirement income. The risk is relying on fixed payouts alone for three decades.

Myth 4: "A retiree must choose dividend (IDCW) plans for income"

An IDCW payout is not extra income; it is paid out of the fund's NAV, and its amount and timing are at the fund's discretion. It is also taxed at your slab rate. A Growth option combined with a systematic withdrawal plan lets you choose the amount and date yourself, and tax falls only on the gain portion of each withdrawal. Equity-fund gains held over a year are taxed at 12.5% above a ₹1.25 lakh yearly exemption. Our guide on growth vs IDCW covers the mechanics.

Myth 5: "It is all equity or none"

Between a liquid fund and a pure equity fund sit several categories that hold only part of their money in shares:

• Conservative hybrid funds hold mostly debt with a small equity portion. Median volatility 3.66%.
• Equity savings funds mix equity, arbitrage and debt. Median volatility 4.73%.
• Balanced advantage funds shift between equity and debt by a valuation or trend model. Median volatility 8.40%.
• Aggressive hybrid funds hold roughly two-thirds to four-fifths in equity. Median volatility 10.66%, against 13.30% for large-cap funds.

These let a retiree get some equity exposure with smaller swings, and with fewer decisions to make in a falling market.

The real risk: order of returns

The myth-busting has a limit, and it should be stated plainly. A retiree who is withdrawing is more exposed to a crash early in retirement than one who is still saving. Selling units after a 30% fall to fund monthly spending locks the loss in and leaves fewer units to recover. This is sequence-of-returns risk, and it is the reason for the structure below, not a reason to avoid equity entirely.

A structure that respects both sides

1. Two to three years of spending in liquid, money market or short-duration funds, plus SCSS where eligible. This is what you live on in a bad year.
2. Years four to seven in conservative hybrid, equity savings or short-term debt.
3. Year eight onwards in equity or aggressive hybrid funds, such as large-cap index funds or flexi-cap funds.
4. Once a year, move money from the growth bucket to the near-term bucket, ideally after a good year. In a bad year, draw on the near-term bucket and leave equity alone.

How large the third bucket is depends on how much of your spending is already covered by pension, annuity, rent and SCSS. Someone whose pension covers all essential costs can hold more equity than someone relying entirely on the corpus.

The short version

After 60, equity is not about getting rich. It is about keeping the later years of retirement funded once inflation has eroded the fixed payouts. Hold it only with money you won't need for seven years or more, keep enough in safe assets that a crash never forces a sale, and judge the amount by your income floor, not by your age.

This post is educational and not investment advice. Past returns do not predict future returns; the figures cover only funds that still exist.