Retirement planning in your 40s: What should you do?

It is never too late to build something remarkable. Many icons have launched fast-food empires, created fashion powerhouses, reshaped technology, revolutionised retail, or transformed media well after turning 40. A late start has rarely been a barrier to success. The same goes for your retirement. In India, we often delay retirement planning, juggling immediate needs such as home loans, school fees, parents’ medical care, or major family milestones. But crossing 40 isn’t the end of the road. It’s simply the start of a more focussed journey. With a realistic plan and financial tools like life insurance that combine security with steady savings, you still have time to shape a worry-free retirement.

If you are behind, you need to be practical and intentional. Avoid quick fixes. Instead, follow these key steps.

Begin by calculating your net worth. List every asset, including bank deposits, mutual funds, gold, property, and life insurance savings plans. Then, subtract all debts, including home and personal loans. Next, calculate your average monthly expenses. These calculations will give you an estimate on how much money would be required to spend retirement with similar standard of living. Remember, after retirement, some costs, such as EMIs, may decrease, but healthcare and daily living costs will persist and possibly even increase. Therefore, you need to plan for retirement with a buffer to account for inflation, healthcare, or any other expenses. This requires you to switch from a ‘spend-and-save’ to a ‘save-and-protect’ mindset. Your biggest ally now is discipline. You should trim your discretionary spendings now and try to save 30 to 40 percent of your income with a good chunk directed towards your retirement fund.

It is imperative to prioritise children’s needs without neglecting your future entirely. Divide your investments into two clear categories—short-term (such as children’s education or weddings) and long-term (such as retirement). Handle immediate goals with conservative instruments, like recurring deposits or short-term fixed deposits. However, channel long-term savings into solutions like life insurance plans, annuity plans, mutual funds, and more designed to help you grow wealth steadily. The key is balance. 

Life is uncertain, yet, you have the power to safeguard your family after you. Life Insurance plans fortify your investments and shields your family. Hence your family’s financial security should also be a part of your retirement planning. A simple term insurance plan can protect your family with a payout if something unexpected happens to you. Other life insurance plans like Unit Linked Insurance Plans (ULIPs) and Guaranteed saving plans provide you with a life cover to secure your family and investment opportunities to grow your wealth. Hence, these plans could be ideal to plan for your child’s education and your retirement with your family secured.

Life insurance plans like ULIPs, endowment, and annuities play a crucial role in retirement planning by offering a mix of investment growth, financial security, and guaranteed income. ULIPs help build a retirement corpus by investing in market-linked funds while providing life cover. The flexibility to choose equity or debt funds allows you to align investments with your risk appetite. Over time, the compounding effect helps accumulate substantial wealth, which can be withdrawn systematically post-retirement.)

Endowment plans, on the other hand, offer a more conservative approach by combining life insurance with a savings component. These plans ensure a lump sum payout upon maturity, making them ideal for individuals seeking stable and risk-free retirement funds. Unlike ULIPs, endowments provide fixed returns, ensuring a predictable financial cushion in retirement.

Annuity plans provide guaranteed lifelong income, making them a reliable post-retirement solution. With options like immediate and deferred annuities, you can start receiving payouts either right after investing or at a future date. Immediate annuity plans would be ideal to those planning their retirement a bit late. These plans eliminate market risks and ensure a steady cash flow, reducing dependency on other savings.

By integrating these plans into your financial strategy, you can secure a comfortable retirement with a mix of growth, safety, and assured income.

Starting in your 40s may not be ideal, but it is far from too late. The most important step is to take action now. Get clear on your finances, adopt a disciplined savings habit, and make smart use of life insurance products designed to offer both security and retirement income. Your second innings can still be fulfilling and financially comfortable. Do keep in mind that it begins with what you do today.