Retirement planning used to be straightforward. In the 90s, it was simple: save consistently, hold money in fixed deposits, potentially have an extra house or two, and rely on pensions or children’s support. Many families used this formula. But now it appears those “golden rules” may not serve you well today.
Consider Mr. Sharma. At 58 years old, he had followed the 90s retirement playbook exactly as prescribed. He had built two houses, he had most of his wealth locked up in fixed deposits, and he made the common assumption that if need be, his son, who was working in a foreign country, was his back up. Then the medical bills came in, the rental income barely covered the essentials, and he had to admit these were out dated strategies that did not fit the realities today.
The facts are inflation, longevity, increased healthcare costs, and diminished returns on fixed-income have changed everything. What may have worked for your parents, and possibly for you two decades ago, can literally steal your financial future if you fall into the trap of using them without question. If you are going to adequately prepare for retirement in today’s world, the first step is easy: do not accept the existing rules without question; unlearn them if they tried to trap you.
Let’s look at seven once-popular retirement strategies that no longer work—and what you should do instead.
#1. “Fixed Deposits Will Save You”
Why it worked in the 90s: At that time, fixed deposits had a 12-14% return rate so retirees could simply take the returns every year and live off those returns and not touch the principal. With low inflation and simple lives, fixed deposits were a completely safe and predictable cash flow for income and earned the label countless people’s retirement “plan”.
Why it does not work today: FD rates are now 6–7%, and many times they are lower than inflation. If you do not keep up with inflationary expenses, your purchasing power erodes year by year. Year after year, that small deficit will quietly whittle away your funds without you noticing in due time.
What should you do instead: FDs still have a place in your retirement portfolio but they cannot be the main source like earlier times. You need to allocate and diversify into equities, for long-term growth, debt for resilience and your risk tolerance, and keep liquid assets for emergencies. Focus on the investment that significantly outpaces inflation to best position your retirement corpus, so that you would not have to compromise your lifestyle over the next 25 – 30 years. Think of FDs as stabilizers instead of your financial engine.
#2. “You Can Count on Your Employer’s Pension”
Why this worked in the 90s: In the 1990s, many of the government and corporate jobs offered an employment benefit in the form of a pension, a guaranteed monthly payment stream that could help you. It was likely comforting to have some certainty that your employer would support your retirement needs.
Why it does not work today: Pensions are no longer a usual financing source in the private sector. The statue of individual EPF contributions is regulated, employers are not tasked to take the financial responsibility of pension plans. Adopting a view that you may be able to live off the expressed or implied pension sourced from an employer, can provide a false sense of security and can lead to an underfunded retirement income source.
What you can do instead: Establish your own self-sufficient retirement. you should contribute to your EPF, invest in NPS, mutual funds and track your retirement corpus . Imagine you may receive no security from anywhere else and develop a plan that can maintain your existing lifestyle by yourself.
#3. “Buy Property, Rent Helps Fund Retirement”
Why this worked in the 90s: Real estate returns were predictable, and rental income usually grew faster than inflation. Owning more than one property appeared to be the fastest way for many families to secure an income for retirement.
Why it does not work today: Rental yields are low in some parts of India, there is maintenance, taxes, and should a residence become vacant, you might have to wait a long time for it to generate income again. Property is also illiquid; it is not easy to get cash out of a property quickly in the event of an emergency. Depending solely on property might leave you without enough in reserve for the unexpected.
What you can do instead: Use property as a home, or as a long-term asset – not your primary income for retirement. Have a complete retirement plan and use property as a secondary income or back up, complementing your liquid portfolio with other liquid assets including mutual funds, bonds or annuity.
#4. “Children Will Support You Through Retirement”
Why it worked in the 90s: It was the 90s, and we lived in larger families. There was an unquestionable assumption in society that children would be involved in the care of their aging parents; this left many retirees in the 90s presuming emotional and financial support from their children and caused retirees to feel they did not need to save aggressively to retire.
Why it does not work today: Families are generally smaller, children have moved away to follow education or work in other cities or countries, and they have their own financial burdens. This risk is so high, it creates uncertainty and anxiety, and may create a gap between expectations and reality if children are not able to generate sustainable support.
What you can do instead: Plan for financial independence. Build a sizeable retirement fund by saving in mutual funds, NPS, EPF, and a large amount of health insurance to support emergencies. You should treat any support from your children as a bonus, not an obligation. Financial independent means the guarantee of safety, peace, and dignity in your final years.
#5. “Health Care Costs are Not a Big Problem”
Why it worked in the ’90s: Health care costs were quite low, and retirees did not mind going to government hospitals and clinics to get treated; the inflation of medical cost was not on anyone’s radar screens. With the life expectancy being shorter, retirees did not feel the pressure to save a whole hunk of money just for health care.
Why it does not work today: Health care costs are shooting into the stratosphere and will continue to grow by 12-14% every year. If you are not planning properly, just one medical emergency can eliminate the money you set aside for retirement. The low-cost approach asks you to assume too much risk which can negatively impact both your financial security and your lifestyle in retirement.
What you can do instead: Health care is a very substantial component of your retirement plans. Where you can, buy health insurance early in adult life, when premiums are cheaper, along with having a separate health emergency fund. Plan for ever-increasing medical expenses, and try to review your coverage annually. Appropriate planning in the area of health care may allow you to retain your financial autonomy as you age at home, in the event of unforeseen medical costs, and be dignified in doing so!
#6. “It Will Last Your Lifetime Because You Will Not Live That Long”
Why it worked in the 90s: Life expectancy in India was around 60-62 years in the 90’s. Retirees would need to fund their income generally for only 10-12 years so that modest savings could suffice. Many retirees believed their savings would last their typical remaining life expectancy comfortably, and planning for retirement was often relatively straightforward.
Why it does not work now: Life expectancy has increased significantly, and many are living into the 80’s and even 90’s. As such, your retirement can easily serve you for 25-30 years or more. If you plan savings based on the basic assumptions of longevity – you might find yourself out of some money/debt decades before your end of life, with increasing living costs and inflation.
What to do instead: Plan for a long retirement horizon. Assume that you will live longer than the average, and build a corpus that can sustain your lifestyle over decades. Have a long-term growth investment, such as equity and NPS, but also compliment with savings in stable debt instruments, including debentures and bonds. Planning on longevity will both support your lifestyle and reduce your financial/stress later in life.
#7. “Retirement Begins at 60”
Why it worked in the 1990s: The age of 60 was a typical retirement milestone. People typically did not work at all, relying on employer pensions, retirement benefits, cash savings or employer support to live for the rest of their life. Therefore, retiring was truly a matter of thinking about this age.
Why it does not work today: Work is more fluid today. Some work for a full career, while others retire early, some work part-time, others freelance or pursue their passions into their 70’s. Planning rigidly on an age of 60 may lead you to inconsistency between what you want to do and what you have, or worse, missing the opportunity to grow your wealth before retiring.
What you can do instead: Define your retirement based on how you want to live (your lifestyle) rather than by age. Decide when you want to shift from working to not working full-time and then plan your required savings and investments and your withdrawal strategy. Flexibility allows you to enjoy your retirement lifestyle while being financially secure and independent.
The retirement regulations of the 90s were created for a radically different world — high FD rates, pensions, low-cost, and shorter lives. Following these laws today, knowing nothing about what you have lost, wasting time can quietly take away your wealth and security. Today retirement requires financial independence, diversified investments, health care preparedness, adjustable goals. Un-learn the obsolete advice and create a plan that will guarantee you peace, dignity, and a comfortable lifestyle for decades.