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How do you plan for retirement effectively?

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Here’s a comprehensive guide on retirement planning, including investment strategies, insurance needs, and estate planning considerations.

I'm a 25-year-old man and I'm starting to think about retirement. I know it's a long way off, but I want to make sure that I'm prepared. I'm worried about the rising cost of living and inflation, and I want to make sure that my savings will be enough in the future. I've read a lot about retirement planning, but there's still so much I don't know. I'm especially confused about the different types of retirement plans that are available in India and how to choose the right one for me. I'm also not sure how much money I need to save.

Could you please give me some general advice on retirement planning? I would really appreciate any help you can give me.

– Aditya Kumar Gupta, Nagpur

It's great that you're starting to think about retirement early. Retirement planning can be complex, but it's important to start planning early so that you can have a comfortable and secure retirement. Here’s a comprehensive guide on retirement planning which will guide you on the right path.


Retirement planning is the process of preparing for the many financial as well as lifestyle changes that come with retirement. It involves estimating your retirement expenses, setting financial goals, and then carefully developing a plan to achieve those goals. Retirement planning is important all over the world, but it is especially important for Indians, who often have longer life expectancies than people in other countries.

Related topic: How can I be Financially Stable after Retirement?      

When to retire

The first step in retirement planning is to decide when you want to retire. This decision will have to be made based on factors such as your financial situation, your health, and your lifestyle goals. If you have a good pension and enough savings, you may be able to retire early. However, if you have limited financial resources, you may need to work longer.

According to a recent survey, a majority of Indians (52%) anticipate relying on their children for financial support in their old age, while 28% have not yet initiated retirement savings.         
– Survey by Sambodhi Research and pinBox Solutions       

Back-calculating what you need

Once you have decided when you want to retire, you need to back-calculate what you need to save over a period of time in order to achieve your retirement goals. This involves estimating your retirement expenses and then calculating how much money you need to save in order to generate that income.

There are a number of online retirement calculators that can help you with this process. Simply enter your estimated retirement expenses and your desired retirement age, and the calculator will tell you how much money you need to save.

Related topic: How do you Calculate the Amount of Money Needed for Retirement?      

Determining what strategy to approach

Once you know how much money you need to save, you need to determine what strategy to approach. There are a number of different investment options available. Of course, the best strategy for you will depend on your individual circumstances.

Some factors to consider when doing retirement planning include your risk tolerance, your investment goals, and your time horizon. If you are young and have a long time horizon, you may be able to afford to take on more risk. However, if you are closer to retirement, you may want to choose more conservative investments.

India's retirement population is projected to increase 41 per cent by 2031, but only 32 per cent have actually invested in retirement-catered solutions such as annuity products.        
– ICICI Prudential Life Insurance study      


Retirement planning in India faces a number of challenges. One challenge is the lack of financial literacy. Many Indians do not have a good understanding of personal finance or investment options. This can make it difficult to develop a sound retirement plan.

Related topic: Doubling Your Savings with the Senior FD Scheme - A Simple Guide for Senior Citizens

Another challenge is the risk of inflation. Inflation can considerably reduce the value of your savings over time. This means that you need to save more money than you think you will need in order to maintain your purchasing power in retirement.

Finally, you also need to plan for emergencies. Unexpected expenditure and emergencies, such as a medical issues or a job loss, can derail your retirement plans. It is important to have an emergency fund to cover these unexpected expenses.


Despite the challenges, there are also a number of opportunities for retirement planning. Here are three of the most important ones:

1. The role of pension plans

Pension plans can provide a guaranteed income in retirement. There are a number of different pension plans available in India, including government-sponsored plans and private sector plans.

Government-sponsored pension plans

The government of India offers a number of pension plans, including:

The National Pension System (NPS)

The NPS is a government-sponsored pension plan that is available to all Indian citizens (ages of 18 and 65). The NPS offers a number of investment options, and participants can choose the investment option that best suits their needs.

Related topic: National Pension Scheme enrolment through SBI?

Retirement Age Men in India remained unchanged at 60 in 2022 from 60 in 2021.        
Source: Ministry of Finance, Government of India      

The Atal Pension Yojana (APY)

The APY is a government-sponsored pension plan that is specifically designed for low-income earners. The APY offers a guaranteed monthly pension of up to ₹5,000.

Private sector pension plans

A number of private sector companies also offer pension plans to their employees. These plans typically offer higher returns than government-sponsored plans, but they also come with more risk.

2. The role of public and employee provident funds

Provident funds are a type of retirement savings plan offered by many employers in India. Provident funds are a good way to save for retirement, as they offer tax benefits and guaranteed returns.

The Employees' Provident Fund (EPF) is the most common type of provident fund in India. The EPF is a mandatory provident fund for all employees who earn less than ₹15,000 per month. The EPF offers a guaranteed return of 8.1% per annum.

3. Reverse mortgages

Reverse mortgages enable homeowners to borrow against the equity in their homes. This money can be used to finance retirement expenses.

Reverse mortgages are a good way for homeowners to access their home equity without having to sell their homes. However, reverse mortgages can be complex and expensive, so it is important to understand the terms and conditions of any reverse mortgage before you sign it.

The second edition of the IRIS shows that 59% urban Indians believe their savings won’t last even 10 years in retirement. The survey had 3,220 respondents across 28 cities, including six metros.      

How to choose the right retirement plan

The best way to choose the right retirement plan for you is to consider your unique circumstances. Some factors include your age, your risk tolerance, and your financial goals.

If you are young and have a long time horizon, you may be able to afford to take on more risk. This means that you may want to choose a retirement plan with higher returns. However, if you are closer to retirement, you may want to choose a more conservative retirement plan with lower returns.

It is also important to consider your financial goals. If you have a specific financial goal, such as buying a vacation home in retirement, you will need to choose a retirement plan that will help you achieve that goal.

Need for health and life insurance, funds for travel and other retirement activities

In addition to saving for retirement, it is also important to have health and life insurance. Health insurance can help with the cost of medical expenses in retirement. Life insurance can help with financial support for your loved ones if you pass away before retirement.

Related topic: How much Should I Budget for Medical Expenses in Retirement in India?      

It is also important to have funds for travel and other retirement activities. Retirement is a time to enjoy your life, so it is important to have money to pursue hobbies, art, liesure and travel, and spend time with loved ones.

A study conducted by ICICI Prudential Life Insurance, titled 'Is India prepared for retirement?', reveals that India's retired population is expected to grow by 41 percent by 2031. Surprisingly, only 32 percent of this demographic have invested in retirement-focused solutions, such as annuity products. 

Estate planning, trust funds, healthcare directives

Estate planning, trust funds, and healthcare directives are important aspects of retirement planning.

Why is estate planning important?

Estate planning is important for a number of reasons. First, it helps to make sure that your assets are distributed according to your wishes. Second, it can help to reduce the tax burden on your loved ones. Third, it can help to avoid family disputes over your assets.

Why are trust funds important?

Trust funds can be used for a number of purposes, including:

Providing for minor children

Trust funds can be used to provide for minor children until they reach the age of majority. The trust fund can be used to pay for the children's education, living expenses, and other needs.

Providing for people with disabilities

Trust funds can be used to provide for people with disabilities who are unable to manage their own finances. The trust fund can be used to pay for the person's living expenses, healthcare, and other needs.

Providing for people who are unable to manage their own finances

Trust funds can also be used to provide for people who are unable to manage their own finances, such as elderly people with dementia or people with mental illnesses. The trust fund can be used to pay for the person's living expenses, healthcare, and other needs.

Why are healthcare directives important?

Healthcare directives are important because they ensure that your wishes for end-of-life care are respected. If you do not have healthcare directives in place, your loved ones may have to make tough decisions about your care without knowing your wishes.

How to create an estate plan

To make an estate plan, you will first need to make a will and name an executor. You may also want to consider setting up a trust fund.

Creating a will

To create a will, you can use a readily available template or hire an attorney to draft a will for you. When creating a will, you will need to decide who you want to leave your assets to and who you want to be your executor.

Naming an executor

Your executor will be the one responsible for carrying out the wishes and instructions expressed in your will. When choosing an executor, you should choose someone who is trustworthy and who is capable of managing your assets.

Setting up a trust fund

If you want to set up a trust fund, you will need to hire an attorney to draft a trust agreement. The trust agreement will specify the terms of the trust fund, including who the beneficiaries are and how the assets will be managed.

Creating healthcare directives

There are two types of healthcare directives: advance directives and living wills.

An advance directive is a document that states your wishes for end-of-life care. This includes things like whether or not you want to be resuscitated and whether or not you want to be put on life support.

A living will is a type of advance directive that specifically states your wishes for life support.

To create healthcare directives, you can use a template or hire an attorney to draft healthcare directives for you.

Hope this information helps you manage your retirement well. Best of luck!