Early Retirement Planning for NRIs: How Much Do You Need for a Comfortable Life in India?

For most NRIs, planning an early retirement and moving back to India is the ultimate dream. Questions such as “Do I really need ₹2 lakh per month for retiring in India?” or “Do I require ₹3 or ₹4 lakh a month for comforts?” often pop up in these discussions. We would be discussing, in today’s blog, an actual case study of an NRI couple who are based in the U.S. and wanted to retire early in India by earning ₹2 lakh per month in passive income.

The Case Study: Ravi and Shruthi

Ravi and Shruthi (changed names for anonymity) are 40 and 38 years old and have spent over two decades working in the U.S. Like many NRIs in this age group, they have earned their wealth in savings, investments, and RSUs (Restricted Stock Units). Now, they want to go back to India. They need more time to spend with children and parents since they wish to retire early.

Their goal? A monthly passive income of ₹2 lakh. They already own a fully-paid home in India, so there are no EMIs or rental expenses to worry about. But how much do they need in their financial portfolio to achieve this?

Step 1: Asset Allocation

Ravi and Shruthi already have a significant amount of wealth saved up, but early retirement changes how they need to invest. Asset allocation becomes crucial here. Generally, younger people can invest heavily in high-risk, high-return assets like equities. However, after retirement, the portfolio should strike a balance between equities and debt, ensuring both safety and growth. In this case, we opted for a 50-50 split between equities and debt to provide the couple with stable, inflation-adjusted returns.

Step 2: Inflation – The Silent Killer

One of the most significant risks to retirement planning is inflation. While ₹2 lakh a month seems like enough today, it won’t have the same purchasing power 10 or 20 years from now. If we account for an annual inflation rate of 6%, the ₹2 lakh needed at age 41 becomes ₹40 lakh per annum by age 51 and nearly ₹73 lakh per annum by age 61.

Step 3: Calculating the Retirement Corpus

To earn ₹2 lakh a month now, accounting for inflation and an assumed life expectancy of 85, Ravi and Shruthi require a retirement corpus of ₹7.5 crore. The corpus will be enough to sustain an inflation-indexed monthly income during retirement. It will also enable them to continue wealth appreciation while enjoying life in India free from stress.

Recent Trends in NRI Retirement Planning

The Indian government has recently come up with very beneficial tax policies for NRIs, such as exempting them from certain long-term capital gains arising from real estate and equities. In addition, with the Indian rupee gaining strength, NRIs who are returning to India now have a better chance of converting their wealth into a maximum amount. All these make early retirement more attractive for NRIs planning to return to India.

Conclusion

Even for NRIs, early retirement is a dream that can only be accomplished with careful financial planning. We have seen from Ravi and Shruthi how well-planned the portfolio and asset allocation of their account has been, thus taking care of stable and growing passive income. The best time to begin for such NRIs planning an early retirement is now, aligning your financial goals so that they march in tandem with your retirement dreams.

For further information or individualized investment guidance, please reach out to us at Prime Wealth.

FAQs

1. ₹ 2 lakhs per month good enough for comfortable retirement in India?
   Ans- It is ample, based on your lifestyle and location. If you stay in tier-1 cities, the amount gives a good upper-middle-class lifestyle and in tier-2 cities provides a lavish one.
2. Should I liquidate all the US assets prior to coming to India?
   Ans- No; maintaining the assets across the geography can offer greater risk management with better potential for returns.
3. How will the sudden increase in US interest rates impact my retirement planning?
   Ans- More interest rates mean better returns on debt investments, which may reduce the total corpus required for retirement.
4. What is the earliest age at which I can begin planning for early retirement?
   Ans- Plan to start planning at least 10 years before your retirement age to give enough time for corpus building.
5. How should I incorporate healthcare costs?
   Ans- At least 20% of the monthly budget for healthcare expenses, and consider full health insurance cover.
6. Can I keep my US investments going after coming back to India?
   Ans- Yes, you can, but you have to comply with the Indian tax rules and FEMA for foreign investment.
7. Shall I keep my retirement corpus in dollars or in rupees?
   Ans- A mix of both may give better protection against currency fluctuation.
8. How does the new tax regime impact returning NRIs?
   Ans- The new tax regime has simplified tax slabs but fewer deductions, hence requiring careful planning for tax-efficient withdrawals.
9. What is the role of real estate in retirement planning?
   Ans- Limit real estate to 30-40% of your portfolio to maintain adequate liquidity and diversification.
10. How often should I review my retirement plan?
    Ans- Conduct quarterly reviews of your investment performance and annual reviews of your overall retirement strategy.

Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.