For the majority of people, retirement is an impending uncertainty rather than a far-off milestone. According to Krishnan, there are four structural changes that cause worry.
Pensions are no longer guaranteed, to start. “Our parents frequently worked for the government or in stable positions where their employers provided pensions. The majority of us now have to create our own retirement funds,” she remarked. Self-reliance has taken the role of the safety net.
Second, people’s ways of living have evolved. After retirement, previous generations felt at ease reducing their activities. It did not feel like deprivation to forgo comforts like eating out, housekeeping, or taxis. Continuity—keeping up the same level of living for 25 or 30 years after quitting work—is the expectation nowadays.
Third, retirement calculators and financial media frequently spread alarming forecasts. “Either ₹5 crore or ₹10 crore might not be sufficient.” “Projections of ₹20 crore or more are paralyzing to someone who has not even accumulated one crore yet,” she remarked.
Lastly, there is uncertainty regarding execution—how to accomplish such ambitious goals while controlling current costs. During the session, an audience survey revealed that the most common concern was straightforward: would I have enough?
The 33x rule and the inflation shock
Krishnan talked about accumulating 25 times annual expenses, which is one of the most often used retirement benchmarks.
However, she warned that this guideline is sometimes misunderstood. She proposed that a safer multiple in India is more akin to 33 times yearly retirement needs, based on research employing Indian market returns and inflation assumptions.
Applying the multiple to present spending is also the most important error people make.
Assuming 6% annual inflation, a 30-year-old who expects to retire at 60 years old and spends ₹1 lakh per month now will have ₹5.74 lakh per month when he or she retires. “That inflated number, not today’s spending, must be subject to the multiplication factor,” she stated.
Your retirement corpus figure may seem intimidating. However, Krishnan claimed that this is mostly due to people’s difficulty visualizing compounding. “After thirty years, ₹20 crore might have the same feeling as ₹2 crore now,” she stated.
She used a straightforward example to demonstrate this point: a 25-year-old who invests ₹20,000 a month in a SIP and grows it by 5% a year might eventually amass over ₹16 crore over several decades. “People believe that in order to build up such a corpus, they must have wealthy parents or make significant investments. However, it is untrue; time is what they actually require.
Even little changes in presumptions can have a big impact on the necessary corpus. It is possible to significantly lower the aim with disciplined savings increases, lower inflation, or slightly higher returns during working years. “There are a lot of moving pieces in retirement calculations,” she noted.
Early-exit conundrum
After then, the conversation shifted to two contemporary issues: the FIRE (Financial Independence, Retire Early) movement and job instability.
What happens if someone who had intended to work until 60 is fired from a private sector job at 45? Krishnan suggested early savings increases, loan minimization, and increased equity exposure in these situations in order to target higher returns. Preparation is the only way to overcome such obstacles; there are no fast cuts. Being aware of the industry one works in and the degree of job insecurity it entails should also be considered.
She provided a nuanced perspective on FIRE. She asserted that while financial independence is attainable, early retirement is much more difficult in India. Indian homes, in contrast to Western ones, frequently care for aging parents and support children long into adulthood. It is not feasible to completely cease working at 40 due to social and familial obligations.
Additionally, there are macro difficulties. Compared to nations that budget for 2% inflation, early retirement is significantly more costly in India due to its 6% inflation assumption. And there is identity behind the statistics. For many professionals, their identity is defined by their work. Early departure might leave a psychological void.
Instead of aiming for zero income at age 40 and living off the accumulated corpus, Krishnan thinks it would be wiser to achieve financial independence in the sense of having the freedom to scale down, counsel, or pursue meaningful work.
Risk to longevity
She also pointed out two typical planning errors. Underestimating longevity is the first. Higher-income urban Indians frequently survive into their 80s or 90s, despite the fact that the average life expectancy in India is only 72. Plans for retirement must be based on life into 90. While medical advancements can prolong life expectancy, they also frequently result in higher healthcare expenses.
Overestimating post-retirement returns is the second error. Some investors believe they can continue to earn 15% a year and retain 80% stock exposure after retirement, which lowers the necessary corpus. However, markets are erratic, and if interest rates and inflation drop, long-term gains might also. Being overconfident can be harmful.
Krishnan’s suggestion was practical for people in their 50s who were just starting to consider retirement. Reduce portfolio risk gradually. Since Indian real estate transactions might take a while, start selling illiquid assets like land or property as soon as possible. If suitable, look into possibilities such as reverse mortgages. Most significantly, instead of retiring at age 60, think about continuing your career through consulting or part-time positions.
The meeting concluded with a grim yet empowering message. The goal of retirement planning is to comprehend inflation, compound interest, longevity, and how to start early enough for time to work in your favor, not to chase a scary number.
