Retirement planning requires a careful balance between growth and safety, and experts say that getting the equity mix right—based on age and time horizon—is critical to building a sustainable corpus.

Speaking with Zee Business, Vikas Puri, Senior Partner, Complete Circle Capital and Kirttan Shah, Founder & CEO, Truvanta Wealth, explained that with people working for about 30–35 years but potentially living up to 80–85 years, individuals may need to fund nearly 50–60 years of expenses. This makes early and disciplined investing essential.

Puri highlighted that starting early—even with small amounts—can create a large retirement fund due to compounding. He noted that inflation significantly erodes purchasing power, pointing out that a monthly expense of Rs 60,000 today could rise to Rs 2–3 lakh in the future.

He added that even a monthly SIP of Rs 10,000, if continued for around 30 years at an assumed 12 per cent annual return, can potentially grow into a corpus of nearly Rs 3 crore, highlighting how small, consistent investments can build significant wealth over time.

According to Puri, real returns matter more than nominal returns. He explained that if returns are around 10 per cent and inflation is 5–6 per cent, the real return is only about 4 per cent. Hence, a higher allocation to equity is necessary, especially when the investment horizon is long.

Experts stressed that there is no one-size-fits-all rule, and allocations should be aligned with an individual’s risk appetite, financial goals, and time horizon.

In your 20s: Puri suggested that investors in their mid-20s can allocate 90 per cent or more to equity, given the long time horizon and ability to absorb volatility.

In your 30s: Puri recommended 70–80 per cent equity and 20–30 per cent debt. With 20–30 years remaining until retirement, equity should drive portfolio growth.

In your 40s: Puri advised 60–70 per cent equity and 30–40 per cent debt. While the time horizon reduces, staying too conservative can hurt long-term wealth creation.

In your 50s: Vikas Puri suggested a balanced mix of around 45–55 per cent equity, with the rest in debt. Focus shifts towards protecting the corpus while ensuring moderate growth.

At 60 or later: Even late starters should maintain 30–35 per cent equity exposure, according to Puri. He noted that since investments like NPS can continue till age 75–85, some equity exposure remains important.

Shah emphasised that investors should gradually reduce equity exposure as they approach retirement.

• For aggressive investors, he suggested maintaining 70–80 per cent equity up to around age 55, and then gradually shifting to fixed income.
• For moderate investors, he recommended a 50:50 equity-debt mix until about 58, followed by a gradual reduction in equity.
• For conservative investors, he advised opting for lifecycle funds, which automatically rebalance equity and debt based on age.

Shah also pointed out that the National Pension System (NPS) has become more attractive, as it now allows higher equity exposure (up to 75–100 per cent in certain options), along with tax benefits and automatic asset allocation through lifecycle funds.

However, he noted one limitation: at maturity, while up to 60 per cent of the corpus can be withdrawn tax-free, at least 20 per cent must be used to purchase an annuity, which typically offers relatively lower returns.

• Starting early is crucial
• Equity should form the core of long-term retirement planning
• Asset allocation must evolve with age, risk profile, and financial goals

As Puri summed up, maintaining the right balance between growth (equity) and stability (debt), while staying invested for the long term, is the most effective way to build a retirement corpus that can withstand inflation and support financial independence.