At 60, Meena was ready to retire. As the principal of a school in Pune, she had worked in the education sector for 35 years and was looking forward to reading her newspaper in the mornings, weekend excursions with her husband, and spending time with her grandchildren.
She had been planning well for her retirement: she had saved money, invested in fixed deposits, taken out health insurance, and had planned for the inevitable declines in health. For the first decade post-retirement, Meena was in the “reward” mode. But at 75, everything changed. Her monthly expenses had doubled because of inflation, the interest from her FDs had fallen, and costs for healthcare were eating into her savings. With two ageing bodies and longevity ahead of them, the “golden years” were starting to feel far more precarious than secure.
This is the scenario now playing out in thousands of households across India. The dream of retiring at 60 was predicated on a time when life expectancy barely touched 70 years. Today, we are living for longer and healthier, well into our 80s and 90s. Still, most retirement plans are still operating based only on life expectancy of 60-75, presuming just 15-20 years of retired life. The reality is much more challenging than that: at 90 we may now even begin retirement in our 60s and experience at least 30 years of retirement. This is not merely an extension of an excellent vacation but a distinct financial retirement phase that requires its own income, strategy, and fortitude.
So the question should not be simply “when should I retire?”, but rather “how long do I need my money to last?” This article will explore why retiring at 60 years of age in a 90 year life may be among the biggest gaps in planning we face and how you can get ahead of it.
The Retirement Planning Gap: Where We Go Wrong
Most people think of retirement as a 15-year vacation instead of a 30-year journey of financial management. This mindset allows for a dangerous gap between what will be needed and what is otherwise saved or invested. Below are indications of where we go wrong:
#1. We Plan for Life Expectancy, Not Longevity Risk
Average life expectancy is not what people think. Most retirement plans utilise a standard average life expectancy of 75-80. We know averages can be very misleading. There is a 50% chance of living longer than that, especially if we are financially strong, and healthy. The issue is not dying too young, the issue is living too long with insufficient funds.
#2. We Underestimate the Inflation Impact
If your current monthly expense is ₹60,000, in twenty years (assuming a realistic 6% inflation), you will need over ₹1.9 lakh/month to maintain the same standard of living. Fixed income sources, such as pensions or fixed deposits/ simple investments, will not keep up; your current purchasing power will continuously deteriorate.
#3. We Overplay the Safe, Low Yield Area
For the majority of people retiring, you are mainly moving into FDs, and as a result, you do not think about the longer-term impact of 5% returns post tax, never factoring in inflation. If you are making money at 5% on instruments, but inflation is eating away at 6%, your real return is negative. First, ignoring inflation for 30 years is worse than market volatility.
#4. We Ignore Healthcare Expenses
In India medical inflation is amongst the highest in the world. An emergency life-saving surgery that currently costs ₹2 lakh today, probably will cost ₹8-10 lakh, over the next two decades. One medical emergency can financially decimate years of financial planning if there is no adequate health insurance or separate medical contingency fund.
#5. We Develop No Income Post-Retirement
Often we think retirement means no more work; not true. With the potential to live for several years to come, the lack of any form of income such as part-time work, rental income, or investment returns can place enormous pressure on the retirement corpus.
Rethinking Retirement: A 3-Decade Strategy
When you are 60 and may live for another 30 years (or more), you are no longer going on a short vacation; you are embarking on a 30-year financial journey. The traditional methods of retirement planning – diving straight into fixed income government bonds and annuities, relying only on your EPF/pension income, or simply cashing out your entire retirement fund to put in fixed deposits – are insufficient. It is essential to develop a strategy that provides safety, growth, and flexible income to last the entire period.
Here’s how to establish a retirement plan for living longer and for income for life:
Use the “3-Bucket Strategy” to Structure Your Corpus
Bucket 1: Short Term Needs (0–5 Years)
The first order of business in retirement planning is addressing your immediate needs—expenses that arise in the first five years after you stop earning a regular paycheck. This short-term bucket acts as a cushion during this transition, giving you the mental space to adjust your lifestyle and build healthy retirement spending habits.
Since these funds will be accessed right away, safety and liquidity take priority over high returns. Ideally, this money should be parked in low-risk, easy-access instruments such as:
- High-yield savings accounts
- Short-term fixed deposits
- Liquid or ultra-short-duration mutual funds
In addition to covering essential monthly expenses like groceries, utilities, rent, EMIs, and healthcare premiums, this bucket also provides room for discretionary spending—occasional holidays, family celebrations, or milestone events.
Crucially, this is also where you should allocate money toward a health emergency fund—a separate reserve to cover sudden medical expenses, hospitalisation, or unforeseen treatments not fully covered by insurance. This ensures that an unexpected health event doesn’t derail your broader retirement plan.
By keeping this bucket separate from your long-term investments, you avoid having to sell equity-linked assets during market downturns, thus preserving their growth potential and reducing stress. A well-prepared short-term bucket ensures a smoother, more secure entry into retirement—both financially and emotionally.
Bucket 2: Mid-Term Goals (5 to 15 years)
After mapping out the early years of retirement planning, the next step is to secure the mid-term (normally years 5 to 15). This phase of retirement is about maintaining a similar lifestyle, dealing with increasing expenses, and adjusting to the transitioning demands of retirement planning during those years.
Since the money will not be needed right away, in this bucket there is room for a moderate growth outlook, while still being cautious of possible risks. Investment options may include duration-short to medium debt funds, balanced hybrid mutual funds, or conservative asset allocations with combined equity and debt. There is an opportunity for returns that exceed inflation and leave the corpus reasonably resistant to any potential long-term fluctuating of markets.
Types of expenses that may be funded from the second bucket may range from leisurely major purchases like vehicle replacement, or home maintenance, helping financially supported family members, or for longer-term health expenses, or even for a few goals that might involve extended travel or hobbies. The goal is to allow the money in this area to accumulate, while still keeping it reasonably accessible just in case life throws some unexpected developments your way.
As established, the second bucket occupies space between the “safe” retreat of Bucket 1 and the growth potential of Bucket 3, while fulfilling the essential function of ensuring early retirees do not overly rely on long term investment life too soon, and deplete their financial cushion for future events.
Bucket 3: Long-Term Growth (15+ Years)
The third bucket is intended to last a long time, especially for your retirement needs from year 15 onwards. It is designed to keep retirees from running out of money as life expectancy continues to increase into the 80’s and 90’s.
Because this money will not be needed for the next ten years, it’s easy for it to be invested in a higher-growth vehicle like a diversified equity mutual fund, index fund or an equity-linked pension plan. The ten-plus year horizon allows these funds to weather any market volatility while benefiting from compounding.
But the third bucket is not solely about financing old age but rather preserving independence and dignity in retirement. Money may be needed to help meet rising healthcare costs and long-term care, or just maintaining some semblance of normalcy. Having a reserve will help.
Giving sufficient time for this portion of the retirement plan to grow creates an income source that can be drawn from when the need for cash flow becomes the greatest, sometimes when health, mobility, or the ability to make new financial choices becomes severely limited.
It’s one thing to save for retirement, but you also need to have a smarter way to actually distribute that money. The three-bucket strategy can help you manage your everyday living expenses, your ups and downs in the market, and your long-term goals without losing your cool.
Think of it as building a retirement that pays you back with confidence, not constant worry.