India is facing a serious problem when it comes to retirement planning. As per a recent survey, only 33% of working Indians are saving for retirement. Retirement planning is a must in a country where joint families are turning to nuclear ones with the growing expenses.
Let’s first understand what retirement planning means.
What Is Retirement Planning?
Retirement planning is setting financial targets, discovering investment options, and saving systematically for life when one is not working. This guarantees you can live the same lifestyle, meet medical emergencies, and live independently when your income stops.
Let’s say you’re 30 and want to retire at 60. If you start a monthly SIP of ₹10,000 in a balanced mutual fund (10% annual return), here’s what you can expect:
| Starting Age | Monthly SIP | Years Invested | Corpus at 60 (₹) |
| 30 | ₹10,000 | 30 | ₹2.26 crore |
| 40 | ₹10,000 | 20 | ₹76.5 lakh |
| 50 | ₹10,000 | 10 | ₹20.6 lakh |
Importance of Retirement Planning in India
Below are the reasons why planning early before your retirement makes all the difference:
- Longer life expectancy: With the current average lifespans crossing 70 years, your retirement corpus has to last longer than before.
- No guaranteed pension: Most private-sector jobs in India don’t offer pensions.
- Rising healthcare costs: Medical expenses usually become a significant burden after retirement.
- Inflation: The ₹1 crore today may not have the same value 20 years from now, making it important to plan earlier.
- Dependence reduction: A good retirement plan ensures you don’t rely on children or relatives for financial assistance.
Types of Retirement Plans in India
There are several options, each with different features. Here’s a simple comparison:
| Retirement Plan Type | Returns | Lock-In Period | Tax Benefits (u/s 80C) | Ideal For |
| National Pension System (NPS) | 8–10%* | Until age 60 | Yes | Salaried & self-employed |
| Public Provident Fund (PPF) | 7.1%* | 15 years | Yes | Risk-averse individuals |
| Employee Provident Fund (EPF) | 8.15%* | Until retirement | Yes | Salaried employees |
| Mutual Fund Pension Plans | Market-linked | 3–5 years | Partial (ELSS only) | Aggressive investors |
| Annuity Plans (LIC etc.) | 5–6% | Lifetime | No | Guaranteed income seekers |
*Returns are indicative and subject to change.
How a Retirement Plan Works
Understanding how a retirement plan works is the first step to choosing wisely:
- Contribution Phase: This is the time when you save money regularly while you’re working.
- Accumulation Phase: During this time, your savings grow through interest, market returns, or both, helping you build a bigger retirement fund.
- Withdrawal phase: After retirement, you can begin withdrawing from your corpus. This includes either lump sums, monthly pensions, or both.
For example, in the National Pension System (NPS):
You are allowed to invest until 60. Upon retirement, you can withdraw 60%, which is completely tax-free. Moreover, the remaining 40% must be used to buy an annuity for monthly income.
Advantages of Retirement Planning
Now you are geared up with the basic knowledge of retirement planning, let’s have a look at some of the benefits that come with starting your retirement plan early:
- Power of compounding: If you invest ₹5,000 monthly at 10% for 30 years, it grows to over ₹1.13 crore.
- Tax savings: Most retirement plans offer deductions under Section 80C or 80CCD.
- Customisation: You are allowed to access a plan that is based on your risk appetite.
- Financial discipline: The automation of savings helps you build long-term wealth.
- Emergency backup: Many retirement plans offer partial withdrawals in the case of emergencies.
Best Retirement Plans in India (2025)
If you’re looking for the best retirement plans in 2025, here are a few worth considering:
1. NPS (Tier I Account)
NPS is a government-backed plan that promotes pension accumulation at a negotiable cost. It provides flexible asset allocation between equity, debt, and government bonds and promises complete tax efficiency for higher-income earners.
2. Senior Citizen Saving Scheme (SCSS)
The Senior Citizen Saving Scheme is best suited for a post-retirement period and offers an 8.2% interest (as of Q1 2025). This scheme is safe and is backed by the Government of India.
3. ELSS Funds (with Retirement Focus)
The ELSS Funds retirement plans give market-linked returns with a 3-year lock-in period. As the icing on the cake, a tax deduction is also given under section 80C of the tax act.
Quick Tips to Build a Solid Retirement Plan
- Start early: Even small contributions grow big over time.
- Diversify: Don’t rely on just one type of retirement plan.
- Increase SIPs annually: As your income grows, increase your monthly investments too.
- Plan healthcare: Include health insurance in your retirement plan.
- Reassess every 3–5 years: Tweak your plan based on income, expenses, and goal changes.
What Should You Do Next?
If you haven’t initiated the process yet, consider the possibility of retracing your steps. Start with your monthly budget, choose your ideal retirement age, and estimate corresponding expenses. Depending on how much money you need for retirement planning, choose a type of retirement plan within your risk margin.
If you prefer more modern platforms with open-source tools, consider joining the Dhan MadeForTrade community to get insights for better financial planning.
