Retirement corpus is not enough: Why Indians need to plan for a regular income after retirement

For many Indians, retirement planning ends with building a sizeable corpus through investments, provident fund savings, gratuity and other assets. But accumulating money is only one part of the equation. The bigger challenge is ensuring that those savings generate a dependable income after the salary stops.

“Many individuals assume that their retirement needs will be adequately covered through their retirement fund, investment corpus, gratuity benefits, proceeds from any sale of assets, or any other savings instruments. While these can certainly contribute towards retirement savings, relying solely on them may not always be enough,” said Ashok Manwani, Vice President – Products, Go Digit Life Insurance.

With life expectancy rising and inflation steadily reducing purchasing power, retirees face the risk of exhausting their savings over a long retirement. This makes creating a sustainable income stream as important as building the corpus itself.

“A prudent retirement plan typically requires a combination of growth-oriented investments during the accumulation phase and income-generating instruments during retirement,” Manwani said.

According to him, the challenge for many retirees is not necessarily accumulating wealth, but converting that wealth into a reliable and sustainable stream of income. This is particularly relevant in India, where retirement planning tends to focus heavily on corpus creation, with comparatively less attention given to the withdrawal or income phase.

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Where annuities fit in

Annuities are among the instruments that can help address this gap. Offered by life insurers, an annuity converts a lump sum or a series of premium payments into regular income, generally for the lifetime of the annuitant.

Depending on the product, payouts can either remain fixed or have a market-linked component. A fixed annuity provides predictable income, making it suitable for retirees prioritising certainty. A variable annuity, meanwhile, can combine a guaranteed component with a portion linked to the performance of an index such as the Nifty 50.

For example, an illustration provided by Go Digit Life Insurance shows a 45-year-old paying ₹2 lakh annually for 10 years and beginning pension income at age 61. Under a 100% guaranteed annuity option, the annual payout is illustrated at ₹2,54,813.

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Under a variable annuity with 60% of the annuity guaranteed and the remaining 40% linked to Nifty 50 performance, the illustrated annual payout at age 61 ranges from ₹2,85,905 at an assumed 8% return to ₹3,54,713 at a 12% return.

The illustration is indicative only and does not represent future returns. The annuity continues for the lifetime of the annuitant, subject to the policy terms.

Immediate or deferred annuity?

Retirees can also choose between immediate and deferred annuities. An immediate annuity is bought through a lump sum, with payouts potentially beginning as early as the following month. Payments can generally be received monthly, quarterly, half-yearly or annually.

A deferred annuity, on the other hand, is purchased during the working years, with income beginning at a future date selected by the policyholder.

“Annuities can play a valuable role in retirement planning because they provide a structured lifelong income stream during retirement, helping retirees meet regular expenses with greater financial certainty,” Manwani said.

Ultimately, retirement planning should go beyond asking how much has been saved. The more important question is how that corpus will generate income—and for how long—after employment ends.

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