There is no need to stop SIPs before retirement: keep them running until the salary stops, but as retirement nears, point new money to debt and, once a year, move equity down to a falling target. Redirecting costs no tax; the yearly switches do, and Omkar's table below shows each one with its tax.
Why redirect the SIP instead of stopping it?
Omkar is 52 and earns ₹42 lakh CTC, about ₹2,38,700 a month in hand (FY 2026-27, as worked out in CTC vs in hand salary). He retires at 58, runs a ₹40,000 SIP into equity funds and has ₹1.6 crore in mutual funds, 70% in equity. His EPF, a debt-like asset, is left out to keep the sums simple; counting it would make his switches smaller.
The retirement planning guide puts equity at 30% to 50% in the 50s, a common guideline, and Omkar is above it. Were he to stop SIP payments, his ₹1.12 crore in equity would keep growing while ₹4.8 lakh a year left the plan.
So he points the ₹40,000 to a debt fund instead. Nothing is sold, so no tax arises; the goal-based investing guide calls this the cheaper way to rebalance. Alone, it is not enough: at an assumed 12% a year on equity and 7% on debt, before tax (October 2026 assumptions), he would still be at about 68% equity at 58; changing nothing, about 78%.
Omkar's glide path: the switch and the tax each year
The rest of the de-risking is one switch a year, on a fixed date, from 53 to 58: his equity target falls five points a year, from 65% to 40%, and he moves any equity above it into debt.
A switch out of an equity fund is a sale. The oldest units go first, so each switch is a long-term gain, taxed in FY 2026-27 at 12.5% above ₹1.25 lakh a financial year (section 112A of the 1961 Act, section 198 of the 2025 Act; shared across all his equity gains) plus 4% cess; units held 12 months or less would pay 20% (section 111A of the 1961 Act, section 196 of the 2025 Act). The rates are assumed unchanged.
The table assumes half of each rupee switched is gain. At 53 the tax is (₹3,70,000 less ₹1,25,000) x 13%, the 12.5% rate with cess, which is ₹31,850.
| Age | Portfolio before the move | Equity before, then after | Switched to debt | Gain realised | Tax with cess |
|---|---|---|---|---|---|
| 53 | ₹1.82 crore | 69%, then 65% | ₹7,40,000 | ₹3,70,000 | ₹31,850 |
| 54 | ₹2.05 crore | 64%, then 60% | ₹9,19,640 | ₹4,59,820 | ₹43,527 |
| 55 | ₹2.30 crore | 60%, then 55% | ₹11,09,590 | ₹5,54,795 | ₹55,873 |
| 56 | ₹2.58 crore | 55%, then 50% | ₹13,08,880 | ₹6,54,440 | ₹68,827 |
| 57 | ₹2.87 crore | 50%, then 45% | ₹15,16,160 | ₹7,58,080 | ₹82,300 |
| 58 | ₹3.18 crore | 45%, then 40% | ₹17,29,830 | ₹8,64,915 | ₹96,189 |
| Total | ₹73,24,100 | ₹36,62,050 | ₹3,78,566 |
At 58 he holds ₹1.27 crore in equity and ₹1.91 crore in debt. The oldest units usually carry the most gain; at a 70% share the tax would be about ₹5.69 lakh. Gains on the debt units are taxed at his slab whenever they are sold (units bought from 1 April 2023, section 50AA of the 1961 Act): 31.2% with cess in FY 2026-27 while he earns, his lower post-retirement slab later.
Why spread the switches over six years?
Each financial year has its own ₹1.25 lakh exemption, worth ₹16,250 of tax at FY 2026-27 rates: six moves use six, one big move uses one.
Spreading also keeps his income under ₹50 lakh, above which a 10% surcharge (FY 2026-27) falls on the whole tax bill, salary included (marginal relief softens it just above the line). With pay held flat, his taxable ₹37,80,280 leaves room for about ₹12.2 lakh of gains a year, so his largest, ₹8.65 lakh, fits. The room is about ₹27.8 lakh at ₹25 lakh CTC and ₹14 lakh at ₹40 lakh; once salary alone passes ₹50 lakh, every switch pays the surcharge.
If the same ₹36.6 lakh of gains fell in one financial year, they would cost ₹5,80,063 instead of ₹3,78,566: ₹81,250 for five lost exemptions and ₹1,20,246 of surcharge. Switching straight to 40% now costs about ₹4 lakh but gives up years of expected equity growth on up to ₹48 lakh. One big move near 58 keeps him near 68% equity until then, so a fall in his last working year hits most of the money; the post on sequence of returns risk puts that risk in rupees.
Why does equity stay at about 40% at 58?
Retirement money is not spent on one date: from 58 Omkar draws on it for about 30 years, to 85 or, for a couple, 90. Only the first few years of withdrawals belong in debt; money spent after 65 is seven or more years away, equity's horizon in the goal-based investing guide.
At an assumed 6% inflation prices double in about 12 years, and debt at 7% before tax stays only a point ahead. So the equity share of his asset allocation before retirement ends at 40%, inside the band for the 50s, and the guideline still keeps 20% to 30% in equity from 60.
Less equity is a trade-off, not a gain: lower expected growth in return for fewer forced sales after a fall once he draws.
Can you continue a SIP after retirement?
Yes, as long as something other than salary pays for it, such as rent or a pension. Omkar's SIP is paid from his salary, so it ends at 58, and he then draws from the debt side first so equity is not sold after a fall. The post on SWP tax works out what a monthly withdrawal costs.
Dhi links each of your investments to the goal it is for, retirement among them, and answers from your own numbers how much of that money now sits in equity. Dhi nudges you when a goal needs attention and takes no commissions on any fund.
Frequently asked questions
This is general information for salaried individuals in India, not personalised financial advice.
