The Four Retirement Risks Most Indians Do Not Plan For

Standard retirement preparation guidance in India tends to focus on pension contributions, savings amounts and EPF balances. These are important — but research consistently identifies four additional dimensions that significantly affect retirement outcomes, and that rarely appear in pre-retirement planning conversations. (General educational content.)

1. Healthcare Cost Escalation

Medical expenses in India tend to rise faster than general inflation, particularly after age 70. A hospitalisation, a chronic diagnosis or a course of specialist treatment can represent a significant cost that a standard retirement budget does not absorb easily. PhilHealth, Ayushman Bharat and employer health plans provide floors — but gaps in coverage tend to widen as health needs increase with age.

Budgeting for healthcare in retirement requires estimating not just current costs, but costs that may increase at 8–12% per year over a 20–25 year retirement horizon.

2. Sequence of Returns Risk

NPS subscribers whose corpus experiences a significant market downturn in the first few years of retirement face a risk that is often underappreciated. If a large drawdown occurs early — even if markets recover fully later — the total income that can be sustained from the corpus over a long retirement is reduced. This is because withdrawals made during a downturn consume a larger share of the corpus than the same withdrawals would in a recovering market.

This is distinct from average return risk. Two portfolios with the same average return over 20 years can produce very different outcomes if the sequence of good and bad years differs.

Illustrative image. Source: Unsplash.

3. Loss of Work Structure and Purpose

Research on retirement satisfaction consistently identifies loss of daily work structure, professional identity and workplace relationships as one of the strongest predictors of dissatisfaction in the early years of retirement — regardless of financial position. For many people, work provides not just income but a significant portion of daily social contact and sense of purpose.

This dimension is rarely discussed in financial planning contexts, but it is frequently cited by retirees themselves as something they did not anticipate adequately.

4. Family Financial Obligations

Many Indian retirees continue to support adult children, grandchildren or elderly parents after leaving employment. These obligations — culturally important and often deeply held — are rarely built into retirement income projections. When they are larger than expected, they can put pressure on a retirement plan that looked adequate on paper.

Acknowledging these obligations as a line item in retirement planning, rather than treating them as variable or optional, helps produce a more realistic picture of the income needed.