No government pension? Here’s how to plan your retirement successfully

Assume you are working hard to meet necessary monthly expenses, saving for your child's college education, and managing EMIs for the house and the family car. Amid these responsibilities, planning for retirement will often take a back seat. For most salaried professionals in the private sector, the absence of a government-backed guaranteed pension can make old age financially challenging if proper steps aren’t taken.

This makes self-driven retirement planning not just a choice but a necessity. Whether you're in your early 30s or slowly heading towards your 50s, now is the perfect time to ensure a comfortable and independent retirement.

Steps to Build a Sufficient Retirement Corpus

Planning for retirement requires careful consideration and strategic steps to ensure you have enough funds to support your lifestyle when you no longer work. Here are the key steps to help you create a solid retirement plan:

1. Assess Your Financial Goals

Start by estimating your monthly expenses after retirement. Include essential costs like groceries, utilities, and healthcare, along with discretionary (non-essential) expenses like international travel.

Take inflation into account. For example, if your monthly expenses are Rs 40,000 today, you may need around Rs 71,640 per month or more in 10 years, assuming a 6 per cent annual inflation rate.

2. Calculate Your Ideal Retirement Corpus

A helpful way to estimate your retirement corpus is by using the 4 per cent withdrawal rule. This rule suggests that you can safely withdraw 4 per cent of your total retirement savings each year without depleting your funds too quickly.

For example, if you expect to need Rs 12 lakh annually to cover your expenses during retirement, you can calculate your ideal corpus by dividing the desired annual amount by 4 per cent. So, Rs 12 lakh÷0.04 (which is 4 per cent) gives you a target corpus of Rs 3 crore.

Important factors to consider when calculating your retirement corpus:

• Current age and retirement age: The number of years left to save determines how aggressively you need to invest.

• Lifestyle aspirations: Would you like to maintain, reduce, or enhance your current lifestyle? Plan your corpus accordingly.

• Healthcare costs: As people age, their medical expenses often increase. Account for healthcare inflation and secure adequate health insurance.

• Liabilities: Try to ensure that you are debt-free before retirement to avoid financial stress.

3. Understand Your Current Financial Standing

Evaluate your current savings, EPF, or any pension scheme contributions, as well as existing investments. Identify the gap between your current funds and the target corpus. This clarity will shape your investment strategy.

4. Invest in the Right Instruments

Start early to leverage the power of compounding (an act of adding interest on interest). You can diversify your portfolio with options like:

• Mutual Funds (Equity & Debt): Potential for high growth over the long term.

• National Pension System (NPS): Tax-efficient retirement savings with annuity options.

• Public Provident Fund (PPF): Guaranteed returns and tax benefits.

• Annuity Plans: Assured lifelong income.

5. Review and Adjust Regularly

It’s essential to periodically review your investment portfolio to ensure it remains aligned with your retirement goals. As life circumstances and financial markets change, rebalancing your investments becomes necessary.

For example, if you get a promotion or a salary increase, your income may rise, which could allow you to take on more risk in your portfolio. In this case, you might shift some funds into higher-risk, higher-return investments like equities to maximise growth.

Some Pension Schemes Available for Salaried Professionals in India

1. Employees’ Provident Fund (EPF)

The Employee Provident Fund (EPF) is a savings plan for salaried employees in India that helps them prepare for retirement. It is managed by the Employees' Provident Fund Organization (EPFO), which operates under the Ministry of Labour and Employment.

Both you and your employer contribute 12 per cent of your basic salary to the EPF account every month. Over time, these contributions grow with interest.

2. National Pension System (NPS)

The National Pension System (NPS) is a government-backed retirement savings plan managed by the Pension Fund Regulatory and Development Authority (PFRDA). It is open to employees from the public, private, and unorganised sectors, except those serving in the armed forces.

NPS encourages you to invest regularly in a pension account during your working years. Upon retirement, you can withdraw up to 60 per cent of the total savings as a lump sum, while the remaining 40 per cent is used to purchase an annuity.

3. Public Provident Fund (PPF)

Public Provident Fund (PPF) is a popular long-term savings option backed by the Government of India. It offers a safe way to invest with attractive interest rates, and the returns are completely tax-free. The interest rate on PPF is set by the Central Government and is typically higher than what regular savings accounts offer.

You can invest a minimum of Rs 500 and up to Rs 1.5 lakh annually, either as a lump sum or in installments.

4. Atal Pension Yojana (APY)

The Atal Pension Yojana (APY) is a government-initiated pension scheme designed to provide financial security for individuals working in the unorganised sector. It guarantees a monthly pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000, or Rs 5,000 after the subscriber reaches 60 years of age.

The pension amount depends on the contribution made by the individual during their working years. The scheme is open to Indian citizens aged between 18 and 40 years who hold a savings bank or post office savings account.

Annuity Plan

An annuity is a financial agreement purchased from an institution where, in exchange for your investment, the provider guarantees a consistent stream of income either rightaway or at a future date.

You can choose to fund an annuity with regular monthly contributions or through a single lump sum payment. Annuities are commonly used as a tool for securing financial stability during retirement. One such reliable savings plan in the market is the HDFC Life Smart Pension Plus.

HDFC Life Smart Pension Plus is a traditional, non-linked, non-participating annuity savings plan designed to help you maintain financial independence during retirement. Here are some key features of it:

• Provides guaranteed annuity income for life with the option to pay premiums through a single or limited payment term.

• Offers coverage for both single and joint life under one comprehensive plan.

• Includes the flexibility to choose between immediate annuity and deferred annuity options.

• Allows selection of payout frequency—monthly, quarterly, half-yearly, or yearly—based on your preference.

Explore more benefits of HDFC Life Smart Pension Plus here.

Conclusion

Planning for retirement without a government pension is a responsibility that demands proactive decision-making and consistent financial discipline.

Start early, assess your goals regularly, and make strategic adjustments to your portfolio as your circumstances evolve. With careful planning and tools like HDFC Life Smart Pension Plus, you can confidently face the future. Start today to build a secure tomorrow.

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