Not saved enough for retirement? Top 5 things to do – here’s how to catch up – The Times of India
Most people wake up to the reality of retirement planning only in their 40s. By then, the nest egg often looks slimmer than what early savers manage to build. The reasons vary: retirement may have felt too distant, incomes may have been modest, responsibilities too many, or past financial mistakes might have erased earlier savings.If this sounds familiar, don’t despair. Yes, you’ve missed out on the early compounding years, but you haven’t missed the bus. With discipline, some lifestyle pruning and a willingness to recalibrate your retirement expectations, you can still get your plan back on track. If you are ready to do all this, you may have a good chance of retiring the way you always wanted.
Prioritise savings over returns
With only 12–15 years left, the lever that matters most now is how much you save, not the returns you hope to earn. Markets and interest rates are unpredictable. Your savings and spending behaviour aren’t. Push up your monthly savings sharply, even if it requires tightening your lifestyle. If you’re covered under the Employees’ Provident Fund, ask your employer to deduct more than the minimum 12%. If not, set up a recurring deposit or begin an SIP in a conservative hybrid fund with roughly 70-80% in debt and 20-30% in equities. The National Pension System (NPS) is also a solid option because it can help you save a neat amount and also cut tax. What’s more, the lock-in rule prevents premature withdrawals.
Avoid taking outsized risks
When your financial position is delicate, high-risk bets can be ruinous. Chasing big returns to “make up for lost time” often backfires. Don’t think of your retirement planning as a T-20 run chase where batsmen have to take risks when time is running out. Low-risk investments may yield modest returns, so you will need to compensate by saving more. Still, don’t eliminate equities entirely. A 10-15% allocation to large-cap stocks, or a low-cost large-cap ETF or NPS equity fund, can provide the long-term growth your portfolio needs without excessive risk.
Trim unnecessary spending
If your investible surplus is limited, cutting frills becomes essential. We are not suggesting you start living a frugal life, but avoidable expenses can be done away with. Delay upgrading to a new car. Rethink the big-screen smart TV. Warren Buffett’s advice holds true: buy what you don’t need today and you may sacrifice what you truly need later. The temporary discomfort of frugality now is far preferable to financial stress in your 70s.
Push back your retirement date
If your savings still fall short, consider working a few extra years. This has a double benefit: more years to save and fewer years your corpus needs to support. Even a 3–5 year extension can dramatically improve the retirement math. Of course, extended working life depends on your health and the continued relevance of your skills. Stay updated in your field, maintain a strong professional network and, above all, invest in your physical well-being to keep the option open.
Think about a reverse mortgage
Many Indians end up “house rich, cash poor,” having locked a lifetime of wealth into property but struggling with day-to-day finances. A reverse mortgage can convert home equity into monthly income. It works opposite to a home loan—the bank pays you against the value of your house. However, though the concept of reverse mortgage is very common in developed markets, it has not gained traction in India due to the emotional attachment to property and less-than-attractive rates. Moreover, not many banks offer this option. Even so, it remains a practical fallback if you enter retirement with insufficient savings.
