Silent partners

In the West, people live their lives as individuals. In India, we live our lives as parts of a whole. The whole could be a family or society, but it’s the main thing. What does this have to do with retirement planning, you might ask?

Some months ago, we did a cover story about retirement planning. It was a perfectly good, well-thought-out article, except that, as we later realised, it treated retirement as a clone of the Western idea. In that world, you could ask someone who is retiring what he has saved, and you would get a single figure - a sum of PPF, FDs, NPS, equity, etc.- that you could just apply to his life with some withdrawal rate in mind, and that would be a good basis for planning. This is not the world we live in. 

In our world, many implicit claims on our retirement kitty are a byproduct of our social and family norms. Some of these claims might be formal, but most exist only in the understanding between people who love each other and would not think to write it down. A daughter’s wedding might be non-negotiable, or parents may need far more support for much longer.

Suraj Kaeley’s Desi Retirement Plan brought out this dimension well, entirely in an Indian context, and it is one I have personally experienced. The nuclear family in India is not a societal design. It is a byproduct of jobs, careers and urbanisation. The household separates, but the claims do not.

What makes this easy to ignore in formal calculations is that it feels like it exists outside the world of spreadsheets and XIRRs. If we mark which portions of our savings belong to which family member, it feels like we are treating our loved ones as pages of a ledger. Therefore, these claims stray off the books, and the retiree’s corpus ends up funding two or three lives where it was supposed to fund just one.

I have written earlier about the instinct that lets a careful saver hold 20 or 30 funds whose purpose he cannot explain, except that each had a logic at the beginning. This habit of overcounting our money is the same kind of instinct. It makes us feel rich and generous because we have lots of money, whereas, in reality, that money is already spent.

Practically every Indian will immediately understand this. However, this simply makes the real problem worse. The real problem is the 4 per cent or 6 per cent withdrawal rate that we smoothly talk about. That’s just fiction. Retirement planning is actually an attempt to predict the next 30 or 35 years, and a prediction across that scale of time is certain to be wrong.

We do not know what the inflation rate will be, and small differences in it can compound into large ones. A corpus which is comfortable at 6 per cent inflation can have you living in poverty if inflation rises to 8 per cent. Nobody making a plan for you when you are 60 can tell you which of these are actually your future. We do not know what healthcare will cost, or when those costs will arrive, or how long our lifespan will be and how long our ‘healthspan’ will be, which is the single biggest uncertainty that will dominate all others. A retirement plan is a piece of fiction which, if we are lucky, will have some resemblance to reality.

That is why our cover story of ‘Mutual Fund Insight September 2026’ edition asks you to run an audit. Almost everything about your retirement is unknown and will have to be adjusted as life’s surprises arrive, and the money you have already implicitly promised to other people is just one of them. You cannot make the future behave as you wish, and you should not let a neat Excel sheet convince you otherwise. However, you can be aware of these things and refuse to believe fairy tales. Therefore, before you plan according to any rule we have ever given you, do the subtraction first. Write down all the money that you have promised away and adjust for a future without it. The smaller kitty will make you worried, maybe even drive you to panic, but it will eventually do you good.

Also read: How much of your retirement money is actually yours?