# What do I choose - SWR or bucket strategy?

Only ***you*** can decide. Seriously, that's the only answer there is. There is no one **best** withdrawal strategy for everybody. The best strategy for you depends on which one you are most comfortable with , and what assumptions you are willing to make.

## Pros

### SWR strategy

SWR strategy makes only one assumption - that the future is not worse than the past in terms of investment outcomes.

SWR strategies can also be easily back-tested using websites like [cfiresim](https://alistair-marshall.github.io/cFIREsim-open/), [firecalc](https://www.firecalc.com/), [Portfolio Visualizer](https://www.portfoliovisualizer.com/), or [Engaging Data](https://engaging-data.com/fire-calculator/) calculators using historical returns using historical returns (usually using US stock market data that stretches back decades and covers major world events like the world wars, the great depression etc) and Monte Carlo simulations.

### Bucket Strategy

People who prefer safety and more predictable cash flow might prefer the bucket withdrawal strategy which is more predictable owing to its stress on keeping the most immediate needs in liquid, low-volatile instruments.&#x20;

Bucket strategy also lends itself well to cases when you may have one-off high value expenses post retirement, like children’s education and/or marriage.

## Cons

### **SWR** strategy

The simplicity of the SWR method is also a potential downside: a lot of complexity in the post-FIRE stage is masked by its apparent simplicity during the pre-FIRE accumulation stage. For example, you need to assume a fixed SWR to calculate a target during the accumulation phase. But during withdrawal, you absolutely shouldn't use a fixed SWR. Instead you have to pick a more complicated strategy for withdrawal like % of portfolio / min-max bounds / Variable CAPE etc.

Also while it only makes one assumption - that the future is no worse than the worst sequence of years seen in the past - it’s an assumption that a lot of people find hard to make. Naturally of course - nobody wishes to run out of money nearing the end of their lives. A lot of people also mistakenly assume that a 25x corpus (ie SWR of 4%) will last forever - it may not. Depending on your asset allocation ratio, it may not last even 30 years because of sequence of returns risk (more on that later). Owing to the lack of long term financial data in the Indian context, its advisable to have a more conservative (lower) withdrawal rate than 4%. Indian FIRE aspirants generally pick between 2.5% (zero real rate of return for a 40 year RE period) and 3.5%.

So it’s really up to you to decide which route you wish to take. Whatever you choose, make sure your expectations are realistic and do not set you up for automatic failure. At any given point, if you are not sure what are realistic returns you may want to consult the folks over at [r/IndiaInvestments](https://www.reddit.com/r/IndiaInvestments).

### Bucket strategy

A downside of the bucket strategy is that it usually ends up with a more conservative portfolio (as compared to an SWR scheme) - which in turn may produce slightly lower returns. This reduction in returns may be important if your retirement duration is expected to be very long - say 50+ years. Most variants of the bucket scheme involve guessing values for interest rates, inflation and returns. There is room for error in this process.
