Retirement planning: Is your corpus enough if you live beyond India's average lifespan? Run this 5-step longevity check

A retirement plan can look perfectly adequate on paper but still fall short if it assumes your money only needs to last until the average life expectancy.

An X post by 1 Finance highlights this often-overlooked risk. “The possibility of outliving your retirement savings”.

The report shared in the post, The Longevity Risk Retirement Plans Keep Missing, argues that retirement plans should account for how long a person could realistically live, rather than rely on a single average life expectancy figure.

“Retirement planning cannot treat longevity as a fixed number,” the firm mentioned in its post. “The horizon needs to account for the range of outcomes, individual differences and the risks that come with a longer retirement.”

What is India's average life expectancy?

According to the report, India’s headline life expectancy at birth is 70.3 years.

But this figure applies to a newborn and does not account for the years a person has already survived. Someone who has already reached 70 could have an implied total lifespan closer to 83 years—a difference of about 13 years.

As the report puts it, “Life expectancy at birth is the wrong starting point.”

For a 60-year-old planning retirement, using 70.3 years as the endpoint could significantly underestimate how long the corpus may need to support them.

Why can an early market fall hurt a retirement plan?

A longer retirement means your savings may have to support you for more years, while remaining exposed to market ups and downs.

The report cites retirement-income research showing that roughly 77% of a portfolio’s eventual outcome can be determined by returns during its first decade of withdrawals.

This is known as sequence-of-returns risk. Two retirees can start with the same corpus and withdrawal rate and earn the same long-term average return, yet end up with very different outcomes if one experiences poor market returns in the early years of retirement.

For someone retiring at 60, the first 10 years can therefore be particularly important.

Is planning only for the average lifespan enough?

No. The report argues that retirement planning should account for the longevity tail—the possibility of living substantially longer than average.

Its model estimates that 12.6% of people who reach 60 today could still be alive at 90, while 4.9% could reach 95.

The report’s point is that lifespan does not suddenly end at the average. A plan based only on the average can leave longer-lived retirees exposed to the risk of running out of money.

Does planning for a longer retirement require a much bigger corpus?

A longer retirement does require a larger corpus, but the increase becomes smaller as the horizon gets longer.

In the report’s illustrative model, a person retiring at 60 and withdrawing ₹12 lakh a year in today’s purchasing power, assuming a constant 2% annual real return after inflation and taxes, would need:

• ₹7.07 crore for a 20-year retirement
• ₹8.48 crore for 25 years
• ₹9.90 crore for 30 years
• ₹11.31 crore for 35 years
• ₹12.73 crore for 40 years

So, extending the retirement horizon from 20 to 40 years doubles the number of years the corpus needs to support, but the required corpus rises by about 80%, not 100%.

This means planning for a longer life may cost less than investors assume, while the financial impact of running out of money in old age can be much larger.

What should investors do differently?

The report proposes a five-step “Longevity Check”:

• Starting age: Begin with your current age, not life expectancy at birth.
• Conditional horizon: Estimate how long you may need your money to last, based on the age you have already reached.
• Tail exposure: Check whether your retirement savings can support you if you live well beyond the average age considered.
• Profile adjustment: Consider your personal circumstances, including wealth, education, location, and insurance.
• Portfolio durability: Check whether your savings and withdrawal plan can handle poor market returns, especially during the first 10 years of retirement.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.