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Retirement Planning: Retirement used to be a simpler concept. One would leave a job at age 58–60 and get by on savings for the next 10–15 years. However, circumstances have changed.

Today, Indians are living longer than ever before. In 1960, the average life expectancy was just 41 years; now, it has crossed 70 years. This means a person retiring at 60 could live to be 85 or 90. Consequently, retirement has evolved from a 10-year phase into a journey spanning 25–30 years.

That is why simply building a large retirement fund is no longer enough. The real question is: will that money last throughout your entire retirement?

Will ₹1 crore be enough?

Suppose you have ₹1 crore at the time of retirement, earning an annual return of 8%. You withdraw ₹3.5 lakh in the first year and increase the withdrawal amount by 5% annually to account for inflation.

In this scenario, your fund does not run out even after 30 years; instead, it could grow to approximately ₹3.37 crore. This happens because, in the initial years, the investment returns exceed the withdrawal amount, allowing the remaining capital to keep growing.

Year    Opening Fund    Annual Withdrawal    Closing Fund
1          ₹1.00 crore             ₹3.50 lakh                 ₹1.05 crore
5          ₹1.19 crore             ₹4.25 lakh                  ₹1.24 crore
10        ₹1.48 crore             ₹5.43 lakh                 ₹1.54 crore
15       ₹1.82 crore              ₹6.93 lakh                ₹1.90 crore
20       ₹2.23 crore             ₹8.84 lakh                  ₹2.33 crore
25       ₹2.71 crore             ₹11.29 lakh                 ₹2.82 crore
30       ₹3.25 crore           ₹14.41 lakh                  ₹3.37 crore

What is the biggest risk?

Today, the greatest risk is longevity risk. In other words, your savings might run out, but your life goes on.

According to a survey, the average Indian has saved only ₹28 lakh for retirement, whereas a comfortable retirement requires around ₹1 crore. This indicates a significant gap—averaging about ₹72 lakh—between the amount needed and the amount saved.

**Inflation and Healthcare Costs**

Inflation is the biggest adversary during retirement. Monthly expenses that stand at ₹50,000 today could exceed ₹2 lakh in 30 years.

Compounding this issue is the rapid rise in medical costs. Expenses related to medication, diagnostic tests, and hospitalization tend to increase with age; consequently, a substantial portion of retirement funds could be consumed by healthcare costs.

**The Importance of Starting Early**

The sooner you begin planning for retirement, the better. Starting early allows more time for the power of compounding to work, enabling even small savings to grow into a substantial corpus.

Do not view retirement merely as the day your employment ends; consider it a long financial journey spanning 25 to 30 years. To ensure this phase is comfortable, you must start preparing well in advance.

**Keep These 5 Points in Mind**

Starting your retirement planning early reduces the financial burden.
Avoid putting all your money into a single investment; diversify your investments across various options.
Review your investments and expenses annually, keeping inflation in mind.
Healthcare costs rise rapidly; therefore, set aside specific funds for health insurance and medical emergencies.
Plan in advance for a regular monthly income post-retirement. Options such as SWP (Systematic Withdrawal Plan), SCSS (Senior Citizen Savings Scheme), and others can assist with this.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.