“The goal of retirement is to live off your assets, not on them.” – Benjamin Franklin
On a sweet Sunday brunch with my friends, my friend Naina opened up about her father, who had been the soul bread-winner in her family until 8 years ago, and was now nearing his retirement. She was feeling torn between anxiety and relief, a juxtaposition of emotions. Should she feel relieved that her father, who had been toiling for years to provide for their family was finally going to get some rest? Or should she worry about whether she will be able to cover for their expenses when EPFs, savings and pensions fall short?
Despite living in the constant fear of retirement, Indian families lack a reliable retirement plan. They rely on fixed deposits and provident funds. But are they really adequate in the constant rise of living costs and inflation?
Mercer, a global consulting company, ranks India last globally with a D grade. A study reported that over 70% of current retired individuals rely on their children amid eroded savings from rising costs and inadequate planning.
The current healthcare inflation in India is around 12-15%; low pensions and high medical bills are a constant struggle for the retired individuals in contemporary times.
The government schemes also cover only up to 50% of what people actually need to live comfortably, which creates an adequacy gap.
Naina also worried that her savings and investment plans might fall short when she reaches the age of retirement herself. Which brings us to our topic, How much money do you actually need for retirement?
Fire the FIRE number:
The FIRE number (Financial Independence, Retire Early) is a popular way of calculating the approximate corpus needed after retirement. It originated in the early 1990s from the book Your Money or Your Life by Vicki Robin and Dominguez.
The 4% rule comprises saving 25 times your annual expenses and withdrawing 4% per year.
FIRE popularized in India by 2016 through urban millennials inspired by global podcasts. But despite adapting for high inflation and tweaking the income to 30-35 times, the calculators failed to match the volatility spikes such as the 2025’s food pressure, 12% medical surges and 40-50 year horizons that amplify sequence risk.
What can actually help the calculations?
A more flexible way to prepare for your retirement is the Bucket Approach. It divides retirement planning in 3 stages; cash for present, bonds/ income for mid term and equity growth for long term.
This process focuses on diversification and growth rather than savings and steady investments. Similar to the Life Cycle Theory which emphasizes on changing needs across different life stages. It states that income, spending and saving change at each stage.
Diversify and balance under the professional guidance of an RIA:
Retirement planning can make you feel lost and confused. It forces you to see far into the future and prepare for it. It’s natural to feel tempted by quick fixes and solutions that are easier to understand and perform. However, taking complicated decisions your life will depend on needs professional guidance. Registered Investment Advisors provide you with assistance at every step of your financial journey, focusing only on your goals and gains. With the increased accessibility of Registered Investment Advisers and goal based financial planning, we hope to help as many Indian families with retirement planning so they can step into retirement worry free.
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