India’s retirement paradox: Saving more may still not be enough

But is that enough? Not always.

Many people spend their working years saving regularly but still reach their 50s without knowing whether they have enough money to retire comfortably. The problem is not always that they did not save. In many cases, they did not know how much they would actually need.

Retirement planning is not just about putting money aside every month. It is about building enough money to support your life after your salary stops. That means thinking about inflation, healthcare costs, investment returns, your retirement age and how long you may live after retirement.

Saving is only the first step. The bigger question is whether you are saving enough and investing it the right way.

Saving every month is not the same as saving enough

Suppose you are investing Rs 20,000 every month for retirement. It may look like a good amount today. But have you asked yourself how much you will need when you actually retire?

People often decide how much to save based on what they can afford today, and continue that same amount for years. But retirement planning should start with a different question: how much money will I need when I stop working?

Your expenses may be much higher by then. Your children’s education may be over, but healthcare costs may rise. You may also want to travel, support your family or simply maintain the lifestyle you are used to.

You also need to think about how long your money will have to last. If you retire at 60 and live until 90, your retirement could last 30 years, a long stretch without a regular salary. This is why a retirement plan cannot be based only on how much you save every month. You need to know the retirement corpus you are aiming for.

Inflation can quietly make your retirement target much bigger

One of the biggest mistakes people make is looking at today’s expenses and assuming they will stay the same after retirement. They will not.

If your household expenses are Rs 60,000 a month today, that does not mean you will need only Rs 60,000 a month after 20 years. Prices of food, housing, transport, medicines and other essentials rise over time, and healthcare can become an even bigger concern as you get older.

So the retirement goal is not simply to build a big corpus. It is to build a corpus that can keep pace with rising expenses and last for the rest of your life.

Starting late can make retirement much more expensive

The earlier you start, the more time your money gets to grow. This is where compounding becomes important.

A person who starts investing for retirement in their 30s has several decades to build a corpus. Someone who starts in their 40s or 50s has much less time, and may have to invest much more every month to reach the same target. You do not need to start with a large amount. The important thing is to start early and increase the amount as your income grows.

A common mistake is to start a SIP or another investment at a certain amount and leave it unchanged for years. Your income and expenses may rise and your lifestyle may change, but if your retirement investment stays the same, you slowly create a gap between what you are saving and what you will eventually need.

The first big mistake is waiting too long

Subhendu Harichandan, Executive Director, Anand Rathi Wealth Limited, says one of the biggest mistakes is delaying retirement planning.

“Biggest mistake investors make is delaying retirement planning, assuming it’s too early to think about or there is enough of time to start later.”

Harichandan also points to another issue.

“Many investors also save a fixed amount without increasing contributions as their income grows or without estimating the actual corpus required to sustain their desired lifestyle.”

Your retirement plan should not remain frozen for 20 or 30 years. It needs to change as your salary, expenses and financial goals change.

Your money also needs to grow, and being too conservative can hurt too

Saving money is important, but where you invest it matters too. If most of your retirement money stays in low growth investments for decades, your corpus may struggle to grow faster than inflation. This does not mean putting all your retirement money into equities. It means your asset mix should match your age, goals and risk level.

Many people become nervous about equity when they think about retirement, on the reasoning that retirement money should be safe. That is true to an extent, but safety does not always mean avoiding equity completely. If you are 30 and your retirement is 25 to 30 years away, keeping almost all your money in low risk assets may limit the growth of your corpus.

Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, says retirement planning should begin early, with the initial focus on growth assets.

“The planning should start early enough and not just a few years prior to the actual retirement.”

He says equity can play an important role in generating returns that beat inflation over the long term.

“Initial investments should be into growth avenues like equity.”

Thomas suggests that investors in their 30s and 40s can have a high equity allocation.

“In the 30s and 40s, the portfolio can be an aggressive one with 80% to 90% exposure to equities as this is the time for accumulation and growth.”

Harichandan also suggests a strong equity allocation for younger investors.

“Investors in their 30s are suggested to prioritise building long-term equity exposure with 80% of the portfolio towards equity, and increase SIPs with every salary increment to allow compounding to work over multiple decades.”

The exact allocation should not be treated as a fixed rule for everyone. The important point is that a young investor with a long investment horizon can usually take more equity exposure than someone close to retirement.

Your 30s, 40s and 50s need different plans

Retirement planning should change as you get older. The strategy that works for a 30 year old may not suit someone who is 55.

In your 30s, this is the accumulation stage. You have time on your side, which gives you more room to take equity exposure and let your money compound. The focus should be on starting early, investing regularly and increasing investments as your salary rises, while avoiding expensive debt that eats into future savings.

In your 40s, this is the time to check whether you are actually on track. Do not simply look at the balance in your EPF or mutual fund account. Calculate how much you may need at retirement and compare it with what you are likely to have. If there is a gap, you still have time to correct it, whether by increasing SIPs, raising retirement contributions or reviewing your asset allocation.

Harichandan says investors in their 40s and 50s should reassess their financial position and work on the retirement gap.

“Investors in their 40s and 50s are suggested to reassess their financial position, eliminate high-interest debt and ensure they are investing enough to bridge any retirement gap.”

This is also a good time to strengthen your emergency fund.

In your 50s, the focus starts changing. You are no longer only trying to grow your money; you also need to protect what you have already built. As retirement gets closer, the portfolio can gradually move towards more stable assets.

Thomas says the shift should happen gradually.

“Once you are in the 50s, in the first half of the decade one may continue with equities and gradually change over to hybrid products, and in the second half of the decade a change over to fixed income is what is required.”

The idea is simple. When retirement is far away, growth matters more. When retirement is close, protecting the corpus matters more. Here is how that shift typically looks:

Life stage	Suggested equity allocation	What experts say
30s	80% to 90%	Accumulation stage. Both experts favour an aggressive, growth-focused portfolio.
40s to early 50s	Still equity-heavy, reassessed	Time to check if you are on track, close any retirement gap and clear high-interest debt.
Second half of 50s	Gradual shift to hybrid, then fixed income	Focus moves from growth to protecting the corpus already built.
Post-retirement	About 20%, rest in fixed income and hybrid	15% to 20% kept in liquid instruments for emergencies; withdrawals are planned, not ad hoc.

EPF, NPS, PPF, mutual funds or FDs: What should you choose?

There is no single product that can solve your retirement problem. Your retirement portfolio can have several parts.

EPF and PPF can provide stability and form part of the fixed income portion of your retirement portfolio. NPS can provide a mix of equity and debt exposure and is designed specifically for retirement savings. Mutual funds can help provide long term equity exposure and growth. Fixed deposits and liquid investments can provide safety and easy access to money.

The key is not to pick one product and stop thinking about retirement. Instead, look at all your investments together. If you already have a large amount of debt exposure through EPF and PPF, your other investments may need to provide more growth.

Harichandan suggests a strategy-based portfolio with both equity and debt.

“Investors have multiple options to invest for their retirement corpus, but among all, the best way is to build a strategy-based portfolio by diversifying across equity and debt with an 80:20 asset allocation.”

He says investors can consider diversified equity funds for the equity part and debt investments for the debt portion.

“If one had active EPF or PPF contributions, they can consider that as the debt portion of the portfolio.”

This is useful because investors often look at each investment separately. Instead, they should look at their entire retirement portfolio.

Keep some money easily available

Retirement planning does not mean locking away every rupee for the long term. You also need an emergency fund. A medical emergency, home repair or family requirement can force you to withdraw from long term investments at the wrong time.

Harichandan suggests keeping around one year’s expenses in liquid and easily accessible investments.

“Apart from that, investors are also suggested to maintain an emergency liquid fund consisting of one year’s expenses in liquid funds or other easily accessible instruments like FDs.”

This gives you a separate pool of money for emergencies, so you do not have to disturb your long term retirement investments every time an unexpected expense comes up.

The biggest question comes after retirement

There is another part of retirement planning that people often ignore: what will you do with the corpus after retirement? Building Rs 2 crore, Rs 3 crore or Rs 5 crore is not the end of the exercise. Your salary stops, but your expenses do not.

You then need a plan to turn your retirement corpus into a regular income. You may need money every month for household expenses, and a separate amount for healthcare and emergencies. The money also has to last for many years.

Thomas says retirees can use their existing assets through planned withdrawals.

“One may draw upon, or consistently withdraw, pre-determined amounts from the existing assets, in the order of preference, to meet lifestyle maintenance requirements on a monthly basis.”

The important word here is “pre-determined.” You should not simply withdraw whatever amount you need every month without checking whether the corpus can sustain that withdrawal for the rest of your life.

Your retirement can last 30 years or more

People often plan for retirement only up to their 70s or 80s. That can be risky. If you retire at 60 and live until 90 or 95, your money may need to support you for three decades or more. This is known as longevity risk, and healthcare can become more expensive as you age.

Harichandan says investors need to consider this while planning.

“Another common mistake is underestimating the impact of inflation, particularly healthcare inflation, which can substantially erode purchasing power over a retirement that may last 25 to 30 years or more.”

This is why retirement planning should not end when you retire. The plan needs to continue through your retirement years.

What happens to your portfolio as you approach retirement

The way you invest should change with age. A person in their 30s can generally take more risk because they have more time to recover from market falls. A person in their late 50s does not have the same luxury, and the focus gradually moves from growth to protection.

Thomas says that after retirement, a larger part of the portfolio can move towards fixed income and hybrid investments.

“While one may still keep the investments intact, a major portion of the portfolio will be in fixed income and hybrid products, and about 20% in equity.”

He also suggests keeping a part of the portfolio in liquid investments.

“15% to 20% of the portfolio should be in liquid instruments to meet any exigencies that may arise.”

These are expert views, not a fixed formula for every investor. The right mix depends on how much you have saved, your other income, your health, your family responsibilities and your risk appetite.

Retirement planning needs regular review

One more mistake is assuming that a retirement plan made at 30 will remain correct until 60. It will not. Your salary, expenses, family responsibilities and the markets will all change, and your retirement date may change too. That is why your retirement portfolio needs regular review.

Harichandan says investors should review and rebalance their portfolios as their circumstances change.

“A successful retirement corpus requires more than disciplined savings. It requires starting early, increasing contributions as income grows, and reviewing the retirement plan regularly to ensure the corpus remains aligned with future financial needs.”

Make a plan. Follow it. Check it. Change it when needed.

The retirement paradox is not really about saving more

The answer to the retirement problem is not simply to save more money. Saving more is important, but it is only one part of the plan. You also need to start early, understand how much you will actually require, account for inflation, and build enough growth in the early years. You need to increase your investments as your income rises, reduce risk as retirement gets closer, and have a plan for turning the corpus into income after your salary stops.

The two experts have different views on the exact asset allocation at different stages of life, but they agree on the bigger point: retirement planning cannot be a one time exercise.

As Thomas puts it: “From accumulation, the focus shifts to preservation as you reach the late 50s.”

That shift is at the heart of retirement planning.

The real question is therefore not just how much you save every month. It is this: will the money you are building today be enough to fund the life you want after your salary stops? If you do not know the answer, your retirement plan may need a closer look.

Disclaimer: The views and investment strategies mentioned in this article are those of the experts quoted and are for informational purposes only. They should not be considered as investment advice or a recommendation to buy or sell any financial product. Investors should assess their own financial goals, risk appetite and investment horizon and consult a qualified financial adviser before making investment decisions.

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