The new retirement playbook: Why young India is thinking 30 years ahead

Time of India

2 days ago

Vivek Jain
Traditionally, retirement planning used to be an afterthought in India. It was something you'd start worrying about in your 50s, once you'd ticked off other milestones like buying a house, sending your kids to college, or clearing off loans.
But this mindset is fast becoming a relic. Today's India is flipping that script. This is especially true when it comes to millennials and Gen Z professionals.
In a country where the median age is just over 28, nearly 60 per cent of all retirement policy buyers are under 40. If there's a single message in these numbers, it is that
retirement planning
is no longer the last mile, it's the starting line.
Young, aspirational and financially savvy
Among all customers buying retirement-oriented insurance policies, only about 11.6 per cent are above 50.
The majority are young professionals younger than 40. They are actively thinking about how to build a corpus that will outlast them by decades.
One important question arises. What's driving this dramatic shift? Perhaps one of the biggest reasons is the longer life expectancy. Another important factor is inflation. The cost of healthcare and daily living is rising faster than most savings accounts can keep up with.
And finally, there are no guaranteed pensions in most private sector jobs.
These factors, coupled with the easy access to digital tools and transparent products, has made it easier to start early and stay disciplined. This generation wants something different. They want the peace of mind that comes from decades of compounding.
Market-linked products take centerstage
If you think Indians only trust traditional insurance and fixed deposits, think again.
Today, ULIPs form over 98 per cent of all retirement portfolios. This includes 57.8 per cent Retirement ULIPs (or Whole Life ULIPs), and 41.6 per cent Pension ULIPs, which itself is an impressive feat, considering this product was only introduced last year. A large chunk of people are moving towards Pension ULIPs which help in corpus creation during earning years and guaranteed lifetime income post retirement.
Traditional and capital guarantee products constitute less than 1 per cent of the retirement portfolio mix.
This overwhelming preference shows how much investors value market-linked growth to outpace inflation. Another reason for this overwhelming preference for ULIPs is the flexibility to switch between equity and debt funds without tax penalties, as well as the ability to plan structured payouts post-retirement.
Another insight worth noting is that most customers allocate heavily to equity funds within their ULIPs, with very few requesting fund switches.
This suggests two things. One that investors are increasingly comfortable with market volatility, trusting the long-term story of Indian equities. Second, more and more people are choosing passive, stay-the-course strategies rather than chasing quick returns.
Deferred annuities, which let the corpus grow longer before payouts start, are also more popular than immediate ones. This again shows that Indians are thinking not just 10 but 30 years ahead.
Small towns, big dreams
Data shows that one of the most remarkable trends is the rise of retirement planning in smaller towns. In fact, a whopping 75 per cent of policies come from tier-2 and tier-3 cities while only a quarter come from India's metros.
Moreover, this is not just about financial inclusion, it is also about aspiration. It is a common perception that as incomes rise, so does the awareness that building wealth is as important as earning it.
However, affordable premiums and the flexibility to start small and scale up have made retirement products accessible even for those with modest incomes. In fact, 40 per cent of retirement policy buyers come from the Rs 5 to 10 lakh bracket, while 26 per cent come from the section that earns less than Rs 5 lakh every year.
34 per cent of such policyholders earn over Rs 10 lakh.
This democratisation of wealth-building marks a new phase where long-term investing is no longer exclusive to high-income earners.
Non-resident Indians (NRIs) are also increasingly participating in this new retirement story, although with some nuances. NRIs contribute about 10 per cent of overall policy volumes. However, while most domestic investors start planning in their 30s, NRIs often begin later. About 16.5 per cent of NRI buyers are above 50, compared to just 11 per cent in India. This is possibly because many NRIs expect to return home later, or because of complexities around taxation and cross-border planning.
Yet, when they do invest, they go big. Average ticket size for NRIs is around Rs 2.25 lakh. This is almost 2.5 times higher than domestic investors. The Gulf region leads with 38 per cent of NRI retirement policies. The surge in NRI participation reflects growing confidence in India's economic fundamentals and the recognition that even when you live overseas, you still want a retirement income stream anchored in India.
It can be said with confidence that the notion that retirement planning starts at 50 no longer holds true. The data proves it. Today's young India is proactively choosing market-linked plans over guarantees. It is planning decades in advance. Whether you're in your 20s or your 50s, the message is clear: start now. The earlier you start, the more freedom you create for yourself tomorrow.
Article authored by
Vivek Jain, Chief Business Officer, Life Insurance, Policybazaar.com
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