7 Common Mistakes NRIs Make During Retirement Planning

Mar 2

At some point in our lives, each of us has considered what our retirement will look like. We think about where we will stay, how much money would we need, and what our lifestyles will be like. How that picture looks is different for each of us but every one of us hopes for that retirement to be as peaceful and relaxing. Nobody wants to be stuck in their child’s house having to write a hit novel just to be able to live independently like Amitabh Bachchan in Baghban.

A rising proportion of NRIs envision moving to India for retirement for a variety of reasons. Some consider proximity to family a major priority while others consider the lifestyle they can afford in cities with comparatively low cost of living compared to where they are working. This is a double edged sword as the perceived benefits of living in India post-retirement also causes many NRIs to underestimate the corpus they require for retirement. I have detailed the situation of a client I recently consulted with below.

Client Profile

Age: 38

Location: Singapore

Monthly Income: SGD 11,500

Retirement Plan: Move to Bangalore at 60

Initial Assumption

“I think I need about INR 4 or 5 crore.”

Reality After Analysis

Required Corpus: INR 8.2 crore

Retirement Gap

INR 3.1 crore short

How Far Are You From Your Retirement Goal?

For many NRIs, the biggest challenge in retirement planning is not a lack of income, but a lack of clarity. Most professionals in Singapore are doing the right things; earning well, saving consistently, and investing in various assets. However, very few have taken the time to quantify one critical number: their retirement gap.

Your retirement gap is the difference between the amount of money you will need to sustain your desired lifestyle in retirement and the amount you are currently on track to accumulate.

Many people assume that because they are saving regularly, everything will work out. Unfortunately, retirement planning does not work on assumptions, it works on numbers. When we begin to factor in inflation, longevity, currency fluctuations, and lifestyle expectations, the final retirement requirement can often be significantly higher than expected.

For example, someone planning to retire in India with a comfortable lifestyle might estimate they need INR 2 to 3 lakh per month in today’s terms. However, with inflation of around 6 to 7%, that same lifestyle could require INR 5 to 6 lakh per month in 20 years’ time. If retirement lasts 25 to 30 years, the total corpus required can easily run into several crores of rupees.

This is where the concept of a Retirement Gap Analysis becomes extremely valuable.

A retirement gap analysis evaluates several important factors:

Your current savings and investments
Your monthly contribution towards retirement
Your expected retirement age
Your desired retirement lifestyle
The impact of inflation and currency movements
The expected growth rate of your investments

Using these inputs, we can estimate whether you are currently on track, slightly behind, or significantly underprepared for the retirement lifestyle you envision.

For some individuals, the result can be surprising. In certain cases, people discover they are much closer to their goal than they expected. In others, they realise there is a gap that needs to be addressed. The good news is that identifying this gap early gives you the time and flexibility to correct course.

Closing a retirement gap rarely requires drastic changes overnight. Instead, it typically involves a combination of small, manageable adjustments such as:

Optimising your investment portfolio for long-term growth
Increasing contributions gradually as income grows
Reducing unnecessary currency exposure
Structuring investments to transition smoothly into retirement income

These small adjustments, when made early enough, can have a profound impact because of the power of compounding over time.

This calculation can sometimes shock individuals, and closing this gap can feel overwhelming. However, it is important to understand that inaction is often the most costly decision. Even if you decide to implement changes gradually, the most important step is simply knowing where you stand today.

A portfolio in SGD with an annualised return of a conservative 6–8% can double in a little over a decade, and this compounding effect becomes even more powerful over longer periods of time.

How Some NRIs Are Ruining Their Chances of a Comfortable and Stress-Free Retirement

Many NRIs accumulate substantial wealth during their working years abroad, but without the right structure, that wealth may not translate into a comfortable and stress-free retirement in India. Here are some of the most frequent mistakes that tend to arise.

1. Underestimating Inflation in India

A common misconception is that because India is cheaper than many developed countries, retirement expenses will remain manageable indefinitely. However, India has historically experienced higher inflation (approximately 6-7%), particularly in healthcare, education, and urban living costs. This means that your purchasing power is halved every 12 to 14 years. Over a retirement that could last 25–30 years, inflation alone can significantly erode purchasing power if it is not factored properly into the retirement corpus.

2. Ignoring Currency Risk

Many NRIs choose to invest in Indian mutual funds or real estate (more on that later) simply because they plan to retire in India. They actively take income earned in SGD and introduce currency risk at a juncture in their investment journey where such risks can eat into potential growth that they might miss out on. In the last 10 years, the SGD has appreciated in value against the INR by more than 47%. This is the real opportunity cost of investing in Indian currency despite earning in SGD.

3. Overinvesting in Real Estate

Real estate often feels like the safest investment when planning to retire in India. Many NRIs purchase multiple properties assuming rental income will support their retirement. In reality, property can be illiquid, rental yields are often lower than expected, and managing properties remotely can become complicated. A well-balanced portfolio typically requires diversification beyond just real estate.

4. Not Planning for Healthcare Costs

Healthcare expenses tend to rise sharply with age. While India offers relatively affordable medical care compared to Singapore, quality private healthcare can still become expensive over time. Many NRIs underestimate the importance of adequate health insurance coverage and a dedicated healthcare buffer in their retirement plan.

5. Failing to Structure Investments for Retirement Income

Building wealth and generating retirement income are two different goals. Some investors accumulate assets but do not transition their portfolios into instruments designed to produce stable, predictable income. This is especially true for retail investors who may focus on growth without considering the role that this growth will play during their retirement. While specific financial tools exist for investors to transition from a wealth accumulation trajectory to a retirement income trajectory, making this shift without a plan can incur heavy costs, unexpected fees, and taxation issues. Without proper structuring, retirees may find themselves with valuable assets but inconsistent cash flow.

6. Delaying Retirement Planning Until It’s Too Late

Finally, one of the biggest mistakes is simply starting too late. Retirement planning works best when it begins early, allowing investments to grow through compounding and giving individuals enough time to adjust their strategy as circumstances change.

Avoiding these mistakes can make a significant difference in turning the dream of retiring in India into a financially secure and comfortable reality. Careful planning, diversification, and a clear understanding of long-term financial needs are key to ensuring that retirement looks the way it was imagined.

If you would like to see where you stand and how you can take the first step towards a comfortable and stress-free retirement, book a complimentary no-strings-attached 20-minute personalised retirement gap analysis today.

Divyesh Daswani