The Retirement Planning Fallacy

Let's start with a simple question that's probably crossed your mind:

Why did our parents retire comfortably with ₹50 lakhs, while today's retirement calculators demand we save ₹5-7 crores?

Open any retirement calculator online, punch in your details, and watch a jaw-dropping number appear on your screen. For most people, that number triggers immediate anxiety. Some might even close the tab and convince themselves that early retirement is just a pipe dream reserved for the ultra-wealthy.

But here's what really happened to me that changed my perspective entirely.

The Retirement Party That Changed Everything

Last year, I attended a retirement party for a colleague at my workplace. Let's call her Sushma. She was 60, had worked diligently for 35 years, and everyone assumed she was finally going to enjoy her golden years, i.e. travel, hobbies, time with grandchildren, the works.

During the party, I casually asked her, "So, Ma'am, what are your plans? Finally going to visit those hill stations you always talked about?"

Her response shocked me.

"I'm taking a one-month break as the company policy requires it. Then joining back as a consultant."

I was stunned. "But why?” I blurted these two words out and regretted them the minute they came out. It was none of my business.

She smiled, but her eyes told a different story. "Living in India and working in the private sector means no social security, like what you see in developed nations. I need to work as long as I can. What if there's a medical emergency? What if I outlive my savings? I can't take that risk."

That conversation haunted me for weeks.

Here was someone who did everything "right" by the old playbook - saved diligently, lived modestly, invested conservatively, and yet, she didn't feel secure enough to truly retire.

That's when it hit me: The retirement playbook our parents followed is fundamentally broken for the next generations.

Why Your Parents Could Retire with ₹50 Lakhs (And You Can't)

Let's do some math. Not complicated finance jargon, just simple arithmetic that reveals an uncomfortable truth.

Your parents' generation (retired around 1995-2000):

• Retirement corpus: ₹50 lakhs (considered solid for that era)

• Life expectancy at retirement (age 60): ~15 years (lived till ~75)

• Healthcare costs: Relatively low when compared to the present

• Children's education: Mostly completed before retirement. Nothing fancy.

• Lifestyle expectations: Modest, community-oriented

Your generation (retiring around 2025-2035):

• Retirement corpus needed: ₹5-7 crores (a minimum according to most calculators)

• Life expectancy at retirement (age 60): ~25-30 years (will live till ~85-90)

• Healthcare costs: 10x higher than the previous generation

• Children's education: Often extends into your retirement years (higher studies, MBA, Master's etc.)

• Lifestyle expectations: International/Domestic Travel, branded shopping, hobbies, maintaining independence

But here's the real kicker: ₹50 lakhs in 1995 = approximately ₹3.2 crores in 2025 when adjusted for inflation.

So technically, you're not being asked to save "more" than your parents. You're being asked to save the equivalent amount, but in a world where:

1. You'll live longer than them. With probably more lifestyle-related health issues.

2. Healthcare will cost exponentially more. It already is.

3. Education inflation has spiralled out of control. Graduation is looked down upon. Masters/MBA a must to flaunt.

4. Lifestyle expectations have fundamentally changed. Travelling to Manali isn't enough. An annual interventional travel is the new norm

Let's break down each of these four forces reshaping retirement planning.

Force #1: Education Inflation – The Silent Wealth Drainer

Remember when getting a bachelor's degree from a decent college cost ₹10,000-30,000 per year? Those days are long gone.

The numbers today are staggering:

According to the Ministry of Education's Annual Status of Education Report (ASER), the average cost of private higher education in India has increased by approximately 10-12% annually over the past two decades, significantly higher than the general inflation of 5-6%.

Let me put this in perspective:

1995:

• Engineering degree from a good private college: ₹50,000-1,00,000 total (4 years)

• MBA from a tier-2 institution: ₹1-2 lakhs total (2 years)

2025:

• Engineering degree from a good private college: ₹10-20 lakhs total (4 years)

• MBA from a tier-2 institution: ₹15-25 lakhs total (2 years)

• That's a 20-25x increase in just 30 years.

But here's what makes this particularly brutal for retirement planning: Many of our generation will be funding our children's education well into their 50s.

Study abroad? Add another dimension:

• Master's degree in the US: ₹50-80 lakhs (including living expenses)

• Even countries like Canada, Australia, or the UK: ₹30-50 lakhs

According to data from the Reserve Bank of India's Liberalised Remittance Scheme (LRS), Indians remitted over $19 billion for education purposes in 2023 alone, a figure that has grown at 15-20% annually over the past decade.

What this means for your retirement:

If your parents finished paying for your education by age 45, you might still be funding your children's education at age 55. That's a full decade less of compounding for your retirement corpus.

Force #2: Living in an Era of "Keeping Up Appearances"

Our parents' generation lived in joint families, shared resources, and found validation within their immediate community. Today? We live in the age of Instagram, where everyone's life looks picture-perfect, and FOMO (fear of missing out) drives spending decisions triumphing investment decisions.

This isn't about judging lifestyle choices. It's about recognising a fundamental shift in consumption patterns.

The data is revealing:

According to the National Sample Survey Office (NSSO) Household Consumption Expenditure Survey (2022-23):

• Urban households spend 30-35% more on discretionary categories (dining out, entertainment, travel, electronics) compared to the previous generation at the same age

• The "lifestyle" category of spending has grown at 12-14% annually, far outpacing income growth for most households.

• As of 2025, non-housing retail loans, including personal loans, have surpassed home loans in India in terms of share of household debt. By March 2025, non-housing retail loans accounted for 55% of the total household debt, while home loans represented just 29%.

What changed?

1995:

• One family car for a decade

• One TV, maybe air conditioning in one room

• Vacation once every 2-3 years, usually domestic

• Eating out was a monthly treat

2025:

• Car upgrades every 5-7 years (sometimes EMIs for two cars)

• Multiple smart TVs, air conditioning in every room, and the latest smartphones every 2 years

• Annual international vacations expected

• Dining out 2-3 times per week, regular weekend entertainment

• Subscription services (OTT platforms, gym memberships, online shopping memberships)

A study by the Azim Premji University's Centre for Sustainable Employment found that urban middle-class families today save only 8-12% of their income, compared to 20-25% saved by the previous generation at similar income levels.

Why this matters for retirement:

Every rupee spent today is a rupee that won't compound for your retirement. If you're 35 and spend ₹50,000 on a lifestyle upgrade instead of investing it:

• At a 12% annual return, that ₹50,000 becomes ₹9.3 lakhs by age 60 (25 years of compounding)

• Multiply this by the hundreds of such choices we make, and you see why building a retirement corpus feels so much harder today

Force #3: Healthcare Inflation – The Retirement Killer

This is perhaps the most underestimated force, and it's the one that terrified my colleague the most.

The brutal reality of healthcare costs:

According to the National Health Accounts (NHA) estimates by the Ministry of Health and Family Welfare:

• Healthcare inflation in India has averaged 10-15% annually over the past decade

• Out-of-pocket healthcare expenditure constitutes 48.8% of total health spending in India (one of the highest globally)

• A report by the Indian Council for Research on International Economic Relations (ICRIER) found that healthcare expenses push approximately 55 million Indians below the poverty line annually

Let me show you what this means in real numbers:

1995 Healthcare Costs:

• ICU per day: ₹1,500-2,000

• Heart bypass surgery: ₹50,000-1,00,000

• Cancer treatment (full course): ₹2-3 lakhs

• Annual health insurance premium (family): ₹3,000-5,000

2025 Healthcare Costs:

• ICU per day: ₹25,000-50,000 (15-25x increase)

• Heart bypass surgery: ₹4-8 lakhs (8-16x increase)

• Cancer treatment (full course): ₹20-40 lakhs (10-20x increase)

• Annual health insurance premium (family): ₹50,000-1,00,000 (15-20x increase)

But here's the real problem: Healthcare needs increase exponentially with age, just when your income stops.

A study published in The Lancet examining healthcare costs in India found that:

• Average annual healthcare spending for the 60-70 age group: ₹80,000-1,20,000

• Average annual healthcare spending for the 70-80 age group: ₹2,00,000-3,50,000

• Average annual healthcare spending for 80+ age group: ₹4,00,000-7,00,000

And that's just for routine care. One major illness can wipe out years of savings:

• Kidney transplant: ₹5-10 lakhs

• Coronary angioplasty: ₹2-4 lakhs

• Hip replacement: ₹3-6 lakhs

• Prolonged ICU stay (2 weeks): ₹7-14 lakhs

According to data from the Insurance Regulatory and Development Authority of India (IRDAI), only 36% of Indians above 60 have health insurance coverage. The rest pay out-of-pocket or deplete retirement savings.

What this means for you:

If your parents needed ₹10 lakhs for healthcare over a 15-year retirement, you might need ₹50-80 lakhs over a 30-year retirement, and that's assuming healthcare inflation moderates (which it hasn't shown any signs of doing).

Force #4: Life Expectancy – Living Longer Isn't Free

Here's a question nobody asks: What if you outlive your money?

According to the Sample Registration System (SRS) data from the Office of the Registrar General of India:

• Life expectancy in India in 1995: 61 years

• Life expectancy in India in 2025: 70.8 years

• Projected life expectancy by 2030: 73-75 years

That's nearly 10-12 years of additional life. Which is wonderful, but also 10-12 additional years that needs funding.

Let me put this in perspective:

Your parents' generation:

• Retired at 60

• Life expectancy: ~70

• Retirement duration: 10 years

• Corpus needed: 10 years of expenses

Your generation:

• Retire at 60 ( huge assumption that you are not let go earlier)

• Life expectancy: ~95 (improving healthcare, better lifestyles)

• Retirement duration: 35 years

• Corpus needed: 35 years of expenses

That's 3.5x the duration your money needs to last.

But here's the cruel math: You don't just need 3.5x the corpus because of time, you need much more because

1. Healthcare costs escalate dramatically in the later years

2. Inflation continues to erode purchasing power

3. You might lose the physical ability to work or supplement your income

4. An increasing possibility you might NOT have a job till 60.

A study by the United Nations Population Division projects that by 2050, nearly 20% of India's population will be above 60. We're moving toward a society where being retired for 25-30 years will be the norm, not the exception.

The compounding problem:

Let's say you need ₹1 lakh per month today for comfortable retirement living.

With 6% inflation:

• Year 1: ₹1 lakh/month

• Year 10: ₹1.79 lakhs/month

• Year 20: ₹3.21 lakhs/month

• Year 30: ₹5.74 lakhs/month

If you live 30 years in retirement (age 60 to 90), your monthly expense requirement will increase by 5.7x due to inflation alone. Your parents never had to plan for this kind of longevity.

According to research by the Pension Fund Regulatory and Development Authority (PFRDA), less than 15% of Indian retirees have an adequate corpus to maintain their pre-retirement lifestyle for 25+ years without exhausting their savings.

The Uncomfortable Truth: The Playbook Has Changed

So when you see that retirement calculator demanding ₹5-7 crores, it's not being unreasonable. It's being realistic about the four forces that didn't impact your parents' generation nearly as severely:

1. Education inflation is eating into your peak saving years

2. Lifestyle inflation is reducing your savings rate

3. Healthcare inflation threatens to wipe out decades of savings

4. Longevity extending your retirement duration by 10-15 years

Your parents' playbook assumed:

• 10-15 years of retirement

• Modest healthcare needs

• Children settled and independent by retirement

• Low lifestyle expenses

• Stable, predictable costs

Your reality demands planning for:

• 25-30 years of retirement

• Escalating healthcare needs

• Potentially supporting children longer

• Higher lifestyle maintenance costs

• Massive inflation in essential categories

That's why copying their approach, saving modestly in fixed deposits and PPF, buying one house, and living simply won't work anymore.

The Additional Wild Card: Job Security Isn't What It Used to Be

Here's the reality nobody wants to discuss openly: Retirement might not wait until you're 60.

In my colleague's case, she made it to 60. But look around today:

• Corporate restructuring happens every 2-3 years

• Automation is replacing middle management roles

• Ageism in hiring is real (try getting hired at 50+ with a fresh start)

• Mass layoffs in tech, banking, and manufacturing sectors have become the new norm

According to data from the Centre for Monitoring Indian Economy (CMIE):

• The average job tenure in the private sector has decreased from 5.2 years (2010) to 3.8 years (2023)

• Employability rates for workers above 45 drop significantly across sectors

• Forced early retirement (age 50-55) through VRS (Voluntary Retirement Schemes) is increasingly common

What this means:

You might not get to choose when you retire. The job market might choose that for you.

If you're forced out at 50 ( or worse, even earlier) instead of 60, that's:

• 10 fewer years of income

• 10 fewer years of corpus building

• 10 additional years the corpus must last

• A potential 20-year swing in your retirement planning

This is why the retirement calculators aren't being dramatic; they're being prudent.

So What Do We Do?

First, accept the reality: The old playbook doesn't work anymore. The rules have changed.

You can't:

• Rely on children to support you in old age (they'll have their own financial pressures)

• Assume 10-15 years of retirement (plan for 25-30 years)

• Ignore healthcare inflation (it's the single biggest risk)

• Maintain the same lifestyle on a fraction of the income

• Hope that "somehow it will work out" (No. Hope isn't a retirement plan)

Retirement is coming. Whether you like it or not.

With the current disruption in job markets, corporate restructuring, and the gig economy replacing stable employment, retirement might come earlier than you planned.

The question isn't whether you should save for retirement. The question is: Will you be ready when it arrives, planned or unplanned?

This isn't about fear-mongering. It's about facing reality with open eyes. It doesn't look good, right?

The good news? You're reading this now, which means you have time. Time to plan, time to save, time to build a retirement corpus that actually works for your generation's reality, not your parents' reality.

In my upcoming posts, we'll break down exactly how to calculate your real retirement number, account for each of these forces, and build a plan that doesn't require you to work till you drop.

Because my colleague Sushma? She shouldn't have to work past 60 just to feel secure. And neither should you.

But first, we needed to understand why the old rules don't apply anymore.

Now we know.

Remember: Retirement planning isn't about following what worked for someone else's generation. It's about understanding what will work for yours. More importantly, what will work for YOU.