For decades, the 4% rule has been touted as the gold standard for retirement planning. But while it might work in the U.S., applying it blindly in India could lead to a financial shortfall that retirees can’t afford.
The 4% rule assumes that withdrawing 4% annually from your retirement corpus will allow your savings to last 30 years. However, this was developed based on U.S. conditions — low inflation, steady investment returns, and government-supported healthcare and pensions.
India presents a very different financial landscape. With average inflation hovering around 6% and unpredictable medical costs, the same strategy falls short. Add to that the lower returns from fixed-income investments and minimal state-supported safety nets, and the risks of outliving your savings grow.
Take a typical scenario: you’re 30 years old, currently spending 50,000 a month (6 lakh a year), and plan to retire at 55. With 6% inflation, your annual expenses at retirement would swell to nearly 24 lakh. Following the 4% rule, you’d now need a corpus of around 6 crore — not 1.5 crore, as many mistakenly believe.
Financial experts like Anmol Gupta advise Indian savers to abandon generic thumb rules and instead use real-time calculators and personalized projections. A more realistic withdrawal rate for India is 3%–3.5%, requiring a larger retirement fund than many expect.
The takeaway: The 4% rule isn’t irrelevant, but it’s not built for India’s volatile economic environment. It’s time to stop relying on outdated formulas and start planning with precision — or risk running out of money when you need it most.