Retirement Planning: Avoid These Mistakes For A Secure Future

Retirement planning cannot be overrated enough amid the rising elderly population in India, which is expected to grow to around 347 million by 2050. Notably, 78 per cent of the elderly in India do not have pension security, per the Niti Ayog position paper 'Senior Care Reforms in India: Reimagining the Senior Care Paradigm' in 2024. So, with an increasing elderly population, the lack of pension coverage is a concern. While several retirement-focused schemes are available in the market, investing in them needs planning. A random investment in a financial instrument or withdrawal from it would not serve the purpose, and one might fall short of finances in old age.

Here are five prominent mistakes one would not like to commit and lose the potential benefit that the invested money can generate.

Starting Late

One of the most common mistakes in retirement planning is starting late. As this is a long-term goal and people usually postpone saving for retirement as soon as they start earning, prioritising their immediate needs, preferences, impulses, more than the distant retirement. But the sooner one starts, the better it is due to the compounding effect. Whether it is in equity, debt, gold, or real estate, growth needs time. So, even if it is small, it should be invested as a part of income with a mindset of withdrawing it only after 30-40 years, upon retirement.

Eroding Value Of Money

Inflation eats up the value of money, and if compounding is not higher than the inflation, the real value of money decreases over the long term. On October 1, 2025, the Reserve Bank of India (RBI) lowered CPI inflation forecast to 2.6 per cent, down from earlier 3.1 per cent, for FY 2025–26. But one should take this rate into account while calculating the retirement corpus requirement. 

Preeti Zende, a Sebi-registered investment adviser and founder of Apanadhan Financial Services, says, "Inflation is one of the important factors. Consumer Price Inflation (CPI) index, which the Government considers, and the inflation that we normally observe in our day-to-day life differ. The main reason for this is our lifestyle spending. In retirement, we cannot change our lifestyle spending in a big way, and that's why to cater to this, we should consider inflation at least at 7 per cent while calculating our retirement kitty."

So, factor in a realistic inflation rate to estimate the corpus required, and accordingly invest in avenues that can generate returns higher than inflation.

Withdrawal From Retirement Schemes

Another mistake people usually make is withdrawing funds from retirement schemes such as the National Pension System (NPS), Employees' Provident Fund Organisation (EPFO), etc. Though these schemes offer partial withdrawal prematurely, one should try not to use them as far as possible, enabling them to compound constantly to generate a substantial corpus.

"It's advisable to refrain from making such withdrawals. Instead, you should plan separately for these expenses alongside your retirement planning. This way, you can allow your employee provident fund (EPF), public provident fund (PPF), and NPS to grow and accumulate a significant amount to support you during your retirement years," advises Zende.

Carrying Debt Into Retirement

As getting a loan becomes easier with more online options, less documentation, and people tend to make impulsive purchases, and sometimes more than they need. Just because a loan is easily available, it should not work as a trap leading one to buy unnecessary things, or book a luxury car, or buy a house larger than required. More importantly, one should plan in advance and try to clear all the debts before retirement, or it will increase financial pressure and deplete savings meant for post-retirement life.

Insufficient Insurance

Everyone should have enough insurance to stay protected against various types of exigencies. But it is not just having the insurance, but having a sufficient amount of insurance. Zende suggests, "Once you retire, your active income will cease, which means that if unexpected medical expenses arise and you don't have insurance, you'll have to dip into your retirement savings meant for everyday expenses. That's why it's essential to have a total health insurance coverage of at least Rs 50 lakh to Rs 1 crore, which can be achieved by combining a base plan with a super top-up plan."

She further suggests setting aside some money as a medical kitty to cover expenses that may not be covered by an insurance policy.

One should also have a life cover to keep the family financially protected if anything happens to the breadwinner of the family, at least until the family is dependent. These are small parts of planning, easily ignorable, but costly in the long term.