India is growing older, at a pace most households are financially unprepared for. As per the United Nations Population Fund (UNFPA), almost one of five Indians will be over the age of 60 by 2050. The elderly population in India is likely to rise from about 15 crore today to more than 34 crore over the next three decades. At the same time, healthcare costs continue to rise sharply, while inflation steadily chips away at household savings.

India’s pension scheme lags in terms of coverage, contribution

Yet, retirement planning in India still largely operates on assumptions built for another era.

We are living longer

Better healthcare access, improved sanitation, rising incomes and medical advancements have helped Indians live longer than previous generations.

But the longer people live, the more years they must fund without a regular income. For most people retirement calculations are based on current spends than future costs.

A family spending ₹75,000/month today may believe a few crores will comfortably sustain retirement. But inflation changes the picture dramatically. Even with moderate inflation, everyday expenses can multiply several times over two or three decades. The impact becomes even sharper in healthcare.

This is why retirement planning can no longer rely on traditional savings instruments. India needs stronger pension participation and long-term retirement-focused investing habits. Instruments such as the National Pension System (NPS) encourage sustained retirement planning via regulated and relatively low-cost structure. Its flexibility across equity, government securities and debt allocation allows investors to gradually align risk with age and retirement goals. More importantly, NPS addresses the absence of a structured pension culture outside of government employment.

In recent years, medical inflation in India has stayed between 12-14%, significantly higher than overall inflation. Treatment can now use a huge chunk of retirement savings.

India is witnessing a rapid rise in chronic conditions such as diabetes, hypertension and cardiac disorders which are long-duration illnesses requiring continuous medication, diagnostics, follow-up care and, in many cases, repeated hospitalisation.

While earlier generations often associated retirement with reduced spending, modern retirees may experience the opposite. Healthcare, assisted living, home care support, diagnostics and medicines can become recurring monthly expenses changing the role of health insurance in household financial planning. Health cover today is increasingly becoming central to retirement protection. Without adequate coverage, even disciplined long-term savings can erode quickly after a major medical event.

Starting early

The advantage of starting early in instruments such as NPS is the ability to build a retirement corpus gradually over decades while benefiting from compounding and professional fund management. For younger earners especially, time is the biggest asset. Small but consistent contributions made early can potentially create significantly larger retirement outcomes compared with delayed investing later.

Traditional retirement strategies are not able to keep pace with realities.

Fixed deposits, long considered the safest retirement instrument, often fail to generate inflation-beating post-tax returns over long periods. Realty is illiquid and does not always provide reliable rental income. Pension cover in India is also limited.

At the same time, Indian society is changing. Urbanisation, migration, nuclear families and changing career patterns mean many retirees may no longer have the same family- support structures similar to earlier generations. Financial independence during retirement is an economic and a social necessity.

Starting early allows compounding to work over decades rather than years.

But retirement planning cannot be reduced to chasing market returns or accumulating the largest corpus. The larger objective is sustainability. People need savings that can survive inflation, market cycles and rising healthcare costs over long retirement periods.

India is entering a phase where ageing, healthcare, and personal finance will become deeply interconnected public issues. It’s retirement conversation can no longer remain limited to tax-saving investments or fixed deposits.

The challenge is, how does a country prepare millions of people to financially sustain lives becoming longer, more expensive and medically more demanding? This would define the future of retirement planning in India.

(The writer is Head, Pensionbazaar)