Start early, raise your savings rate each decade, and transition from growth to income as retirement nears. Use EPF/NPS/PPF and diversified mutual funds, insure risks, and rebalance annually.
What this guide covers
A decade-wise plan for Indian investors—how much to save, where to invest, and how to de-risk—plus simple formulas, example calculations, tax wrappers, and a practical review checklist.
Quick decade playbook (featured snippet)
- 30s: Target investing 20–30% of income, maintain 70–90% equity, automate SIPs, build a 6–9 month emergency fund, and buy adequate term + health insurance.
- 40s: Raise savings to 30–40%, shift to 60–70% equity, close protection gaps, and align child-education goals without derailing retirement.
- 50s: Move to 40–55% equity, build a 2–3 year cash/bond buffer, plan SWP/annuities, and cut high-cost debt before retirement.
(Related reads: Emergency Fund, SIP vs Lump Sum, How to Choose Term Insurance, What is Rebalancing?)
Step 1: Know your number (simple formulas)
- Inflation-adjusted first-year retirement expense
Future Expense = Present Expense × (1 + i)^n
- i = inflation assumption (use 5–6% for India)
- n = years to retirement
- Required retirement corpus
Required Corpus = First-Year Retirement Expense ÷ SWR
- SWR (safe withdrawal rate) in India: 3.5–4% (assumes a balanced portfolio and multi-decade retirement)
- Monthly SIP to reach the corpus
SIP = Target Corpus ÷ { [((1+r)^m − 1) / r] × (1+r) }
- r = periodic return (annual return/12)
- m = months to retirement
Example
Assumptions:
- Present monthly expense: ₹1,00,000 (₹12,00,000/year)
- Inflation 6%, Pre-retirement return 10%, SWR 3.5%
| Current Age | Years to Retire | First-Year Retirement Expense (₹/yr) | Required Corpus (₹) | Monthly SIP Needed (₹) |
|---|---|---|---|---|
| 30 | 30 | 68,92,000 | 19.69 crore | 86,400 |
| 40 | 20 | 38,49,000 | 10.99 crore | 1,43,600 |
| 50 | 10 | 21,49,000 | 6.14 crore | 2,97,300 |
Message: delaying by a decade meaningfully raises the monthly saving burden.
Step 2: Decade-by-decade strategy
In your 30s: Build growth and habits
- Savings rate: 20–30% of post-tax income (increase with every raise).
- Asset mix: 70–90% equity, 10–30% fixed income/gold.
- Equity: Nifty 50 / Nifty Next 50 / Flexi-cap index or active funds; add ELSS for Section 80C.
- Fixed income: EPF, PPF, short-duration/target-maturity debt funds.
- Gold: Sovereign Gold Bonds (SGBs) up to 5–10% as an inflation hedge.
- Wrappers: NPS (Tier I)—consider Auto Choice (LC75/LC50 glide path) + extra ₹50,000 deduction under 80CCD(1B).
- Protect: 6–9 months emergency fund, term insurance (15–20× annual expenses), family floater health cover, and a basic critical illness rider.
- Tactics: SIPs > timing; use STP for large bonuses; rebalance annually (±5% bands).
In your 40s: Consolidate and course-correct
- Savings rate: 30–40% (tuition + home EMI pressure makes discipline vital).
- Asset mix: 60–70% equity, 30–40% fixed income/gold.
- Use target-maturity funds (TMFs) for predictable debt ladders aligned to fees/education milestones.
- Keep equity diversified; consider limited international exposure via FoFs (risk-managed) for currency hedge.
- Home loan vs investing:
- If after-tax loan rate > expected post-tax debt return, prepay partly.
- Otherwise, continue EMIs and maintain investments to avoid compounding gaps.
- Avoid sprawl: Reduce too many funds/ULIPs; consolidate to a core-satellite.
- Audit risks: Increase health cover; plug disability cover; ensure nominations/Wills updated.
In your 50s: De-risk and blueprint your paycheck
- Savings rate: 35–45% (last big push).
- Asset mix: 40–55% equity, 45–60% fixed income/gold.
- Build a 2–3 year cash/bond buffer (liquid/ultra-short/TMFs maturing yearly) to protect against market falls (“sequence risk”).
- Start planning Systematic Withdrawal Plans (SWP) from conservative hybrid/debt funds.
- Evaluate annuities (for longevity risk) and, post-60, SCSS/PMVVY limits as part of the income ladder.
- Dry runs: 2–3 years before retirement, simulate withdrawals to test tax/cash flow.
- Exit hygiene: Cut high-cost debt, rationalize real estate, and review medical coverage.
A practical glide path (thumb rule)
| Age | Equity | Debt | Gold |
|---|---|---|---|
| 30–34 | 85% | 10% | 5% |
| 35–39 | 80% | 15% | 5% |
| 40–44 | 70% | 25% | 5% |
| 45–49 | 60% | 35% | 5% |
| 50–55 | 50% | 45% | 5% |
| 56–60 | 45% | 50% | 5% |
(Adjust for risk tolerance, job stability, and other assets like ESOPs or business equity.)
Step 3: Use India-specific tax wrappers smartly
- EPF/VPF & PPF (80C): Long-term fixed income core; PPF works well as a volatility dampener.
- ELSS (80C): Equity exposure with tax benefit; 3-year lock-in enforces discipline.
- NPS (80CCD(1B) + 80C/80CCD(1)): Low-cost equity/debt allocation with an automatic glide path; note annuitization rules at exit.
- SGBs: Gold exposure with potential interest component and redemption tax advantages if held to maturity.
- Senior options post-60: SCSS, PMVVY, bank/PSU debt ladders, and annuities to stabilize cash flows.
Tip: Map each wrapper to a role—growth (equity), stability (debt), hedge (gold)—and avoid overlapping funds doing the same job.
Build your retirement paycheck
- Floor income: Pensions/annuities + SCSS/PMVVY interest.
- Bond ladder: TMFs/SDL/PSU ladders maturing every year for 10–12 years.
- Growth bucket: 40–50% diversified equity for inflation beating; rebalance to refill the ladder during good markets.
- SWP design: Withdraw 3.5–4% of corpus annually (adjusting for markets and expenses).
Risk & review framework (annual)
- Rebalance: Back to target mix; harvest gains from outperformers.
- Sequence risk check: Maintain cash/bond buffer; if markets fall >15%, pause equity withdrawals.
- Insurance & estate: Adequacy checks, nominations, Will/Trust updates.
- Tax efficiency: Use basic exemption for senior citizens, optimize capital gains harvesting, and place debt in efficient wrappers.
- Fees: Prefer direct plans, watch expense ratios and credit risk in debt.
FAQs
How much corpus is “enough” in India?
Multiply your inflation-adjusted first-year retirement expense by 25–30× (SWR 3.5–4%). Higher healthcare or early retirement warrants a larger multiple.
What inflation should I assume?
Plan with 5–6% long-run inflation; review annually. City-specific lifestyle and medical costs can run higher.
Should I include my home?
Primary residence is a consumption asset. Treat it as a contingency (reverse mortgage/downsize) rather than a core funding source.
Gold allocation—how much?
Typically 5–10% via SGBs for diversification and INR depreciation hedge.
Can I retire before 60?
Yes—raise savings rate, plan for longer horizons, higher healthcare, and consider a lower SWR (3–3.5%).
Conclusion
Retirement success in India is a function of start time, savings rate, and asset mix discipline. Your 30s are for compounding and protection, the 40s for consolidation and course-correction, and the 50s for de-risking and paycheck design. Use EPF/PPF/NPS, diversified mutual funds, and a bond ladder to turn volatility into reliability—and review annually so your plan keeps pace with life.
This article is educational; consult a SEBI-registered advisor for personalized advice.