One of the most urgent and important financial questions in today’s world is: “Will I have enough money to last through retirement?”

If this thought has ever crossed your mind, you’re not alone. 

Let’s unpack why this fear is real and, more importantly, how you can take control of your financial future.

Longer Life, Longer Post-Retirement Years

Life expectancy in India is already around 72.5 years and is projected to cross 85 soon. If you retire at 60 (assuming you have a job till you are 60 years old) and live till 85 or 90, that’s a post-retirement life span of 25 to 30 years, which is almost as long as your working life!

To put these numbers into context, here is an example.

Let’s consider that you require ₹25,000 a month for your expenses in post-retirement days. That’s ₹3 lakhs per year.

Now, considering a scenario that you will live for 30 years after retirement, you would need nearly ₹1 crore just for the regular monthly expenses. That’s without even accounting for inflation.

Now let’s consider the inflation at just 6%. Your ₹25,000 monthly budget today will become around ₹80,000 per month (or about ₹9.6 lakhs per year) in 20 years to maintain the same lifestyle.

This means your retirement corpus needs to be much larger than you probably imagined.

Medical Costs Are Soaring

Another major concern is medical inflation, which is currently rising much higher than the other components of CPI (Consumer Price Index) inflation. With age, healthcare can become a significant expense. A one-time hospitalization or a long-term treatment could consume a good amount of your savings despite having a health cover. So, you need a retirement corpus that also accounts for the rising medical costs.

So, How Much is Enough?

Here is a simple checklist to help you understand how much you might need:

• Estimate your monthly expenses in retirement.
• Account for inflation at an average of 6–7%.
• Consider major costs like medical emergencies, travel, or help for children (if needed).

Let us consider a scenario for your better understanding. So, imagine you are 40 years old now and want to retire when you are 60. Assume you need ₹30,000/month at your age 40 for your regular expenses. If we consider an inflation of 6% per year (rise in cost), you might need around ₹96,000/month (or about ₹12 lakhs per year) when you retire at age 60, which is 20 years from now. We will have to consider the travel, medical, and any other expenses, including charity, in addition to this ₹95,000 per month budget. And if you are expecting to retire earlier or planning for longer retirement horizon, the amount will increase accordingly.

Countering Retirement Risks: The Tools You Need

So, how do you prepare for such a long retirement without the fear of running out of money? Let’s now look at key strategies that can help you have a tension-free retirement.

1. Start Investing Early – Let compounding work its magic for you. The earlier you begin, the more you benefit from the power of compounding. Even modest investments made consistently over time can grow into a substantial corpus.
   
2. Ensure Adequate Health Insurance –  You might have a health insurance policy provided by your employer. However, ensure that this policy covers all major illnesses. It’s wise to purchase an additional health insurance policy to fill any gaps in coverage or will work as a backup when you are in between jobs. It also ensures you safeguard yourself from being denied a health insurance due to any health conditions as you age.
   
3. Pure Term Insurance is Essential – A pure term life insurance policy ensures that your dependents are financially protected in your absence in case of any unfortunate event. Avoid combining insurance with investment; both serve different purposes and should be kept separate.
   
4. Have a Financial Plan – Develop a clear strategy for both present and future investments. Ensure to maintain a proper asset allocation and set aside funds for emergencies and day-to-day expenses.
   
5. Include Retirement Planning in Your Financial Goals – Retirement planning should be a key component of your overall financial planning. You should start investing for retirement at the begin of your career itself even if it is a small amount. Identify suitable long-term investment products, such as equity mutual funds, multi-asset funds, or gold funds, and invest accordingly.
   
6. Seek Professional Guidance – A financial advisor or mutual fund distributor can be invaluable in helping you in your financial journey including efficiently planning for all your financial goals. Don’t hesitate to seek expert support to make informed decisions.

Takeaway

With the right planning, retirement can be one of the most rewarding phases of your life. It’s not just about surviving financially. It is about being comfortable and having financial confidence. You may not have any control on how long you live, but you can control how well-prepared you are for those years.

Starting early and planning well with the help of a financial advisor or mutual fund distributor is the mantra to have a peaceful retirement life.

Think of your retirement corpus as your financial independence fund. This corpus gives you the freedom to live life on your terms, to pursue passions, travel, or simply enjoy peace of mind knowing that you are financially secured.

With life spans increasing and costs rising, retirement planning is no longer optional but essential!

Shreedhara R Bhat

Shreedhara is the Founder & Director of Ara Financial Services Pvt. Ltd. He has an experience of over 2 decades in Financial Service Industry with majority of it in guiding individuals and institutions on their investments requirements.