In 2024, India’s average life expectancy stood at about 70 years. But in urban centres, where access to quality healthcare is better, many Indians are living well into their 80s. This means that if you retire at 60, your savings may need to sustain you for 25 to 30 years. That’s not just a pause after decades of work — it’s an entirely new life stage that demands careful planning. And the planning must begin not just with how much you save, but with how much time you have left to save and grow that money.
Time shapes your strategy
If you are in your 20s or 30s, time is your biggest advantage. You can afford to take more risks because compounding has years — sometimes decades — to do its work. Equity-heavy investments, whether through mutual funds, NPS, or pension-focused products, can be the growth engines of your retirement corpus.
If you’re starting later, say in your 40s or 50s, the equation changes. The runway for compounding is shorter, so you may need to be more conservative with risk but more aggressive with how much of your income you set aside. When time isn’t on your side, contribution rates matter more than returns.
Lifestyle first
The foundation of retirement planning is understanding how much you’ll need, and that begins with your present spending habits.
Several budgeting apps and online calculators can help. They track monthly spending and project what those expenses could look like in retirement, adjusted for inflation. You don’t need an exact number — what you need is a realistic monthly target that gives direction to your plan.
The right investment mindset
Once you’ve estimated how much you’ll need, the next step is adopting the right investment approach for your stage of life.
Starting early? Time is your ally. Equity exposure, whether through mutual funds, NPS, or Unit Linked Pension Plans (ULPPs), should be at the centre of your portfolio.
ULPPs are retirement-oriented products that combine two features: life insurance and market-linked investments. Every premium you pay is split — one part goes toward life cover, while the rest is invested in funds of your choice (equity, debt, or balanced). Unlike traditional pension plans with fixed returns, ULPPs give you the flexibility to adjust your risk exposure. When you’re young, you can lean heavily into equities, and as you get closer to retirement, you can gradually shift toward debt.
Closer to retirement? The priority shifts from growth to stability. ULPPs remain relevant here too, because they allow you to rebalance — moving funds from equity to debt as you near retirement to protect your corpus. Alongside ULPPs, you might use safer options like debt funds, fixed deposits, or annuities. With less time for compounding, the focus is on disciplined, higher contributions rather than chasing high returns.
Working with a financial adviser can help you fine-tune this mix. The goal is to strike a balance: growth through equity exposure, protection through debt and annuities, and insurance cover to safeguard dependents.
Plan for risks
Even the best-laid retirement strategies can go off track if you don’t plan for life’s uncertainties.
Accumulating a retirement corpus is only the first step. The second is ensuring it lasts through your retirement years.
EPF, NPS, and ULPPs are all useful vehicles for building wealth. What sets ULPPs apart is their flexibility at the point of retirement. Once a ULPP matures, you can withdraw a portion of the corpus as a lump sum and use the rest to buy an annuity — an instrument that provides a guaranteed income stream for life.
Here’s a simple comparison:
Retirement planning is not one-size-fits-all. Your income, risk appetite, dependents, and existing commitments shape the right approach for you. Life events — marriage, the birth of a child, or education milestones — will inevitably change how much you can save, invest, or withdraw. That’s why it’s important to revisit your plan regularly and seek expert guidance when necessary.
The author is CBO, life insurance, at Policybazaar.com