Most of us want to enjoy a similar, if not better, standard of living after we retire. As a non-resident Indian (NRI), you have many retirement decisions to make. More than most other people. And you need to do some serious financial planning if you want to make this dream a reality.

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Planning for your retirement is more essential for an NRI than for a resident. But with a little bit of forethought, you can make your money work for you!

Let’s look at a few NRI retirement tips that can help you prepare for your future.

Financial Planning for NRIs

Financial planning is more important for NRIs than for most other people. You need to make a whole bunch of decisions about your retirement long before you retire.

Questions you will have to answer as you start planning for retirement include:

• You may have moved to your host country in search of a better quality of life. Will your retirement contributions allow you to maintain this lifestyle after you retire? Or do you want to move back to India for your retirement?
• How will inflation, the exchange rate, and future money-value fluctuations impact your retirement fund?
• Most governments incentivize saving for retirement with tax deductions or credits. What are the tax implications for saving for retirements as a non-resident?
• What investments do you have access to as an NRI? Is your investment portfolio diversified enough in terms of risk?

So how do you go about planning for retirement as an NRI?

When deciding how much you should put away each month and where you should invest your money, consider the following financial decisions that affect retirement:

• Life expectancy – The average Indian life expectancy is on the increase. Living longer means you will have to plan more carefully so you can live comfortably for all of your remaining time. Will your retirement contributions allow you to maintain your lifestyle?
• Exchange Rate – If you have existing savings or pension funds in a foreign currency, you can exchange them for INR. Often the exchange rate is in your favour. You can also sometimes transfer a foreign retirement fund to an INR retirement annuity.
• Expenses – While your expenses will differ according to the retirement lifestyle you choose, there are some new expenses that you need to account for. As you age, medical bills and equipment increase. Make sure you plan for this.
• Inflation – A developing economy like India tends to experience higher rates of inflation. When planning for your retirement you need to account for the real cost of goods and services in the future.

Retirement Planning Tips for NRIs

Planning for your retirement is a process that is unique to you. It will depend on where you want to retire, what lifestyle you want, and which retirement plan you prefer.

You must start planning for your retirement as soon as possible. Where and how you want to retire will influence how much money you need to have in your retirement fund. When you want to retire affects the type of investments you make.

1. Consider Your Where, When, and How

The first retirement decision you need to make is to decide which country you want to retire in.

Although you are not currently residing in India, you may want to retire there. Often people decide to retire in India as the increased purchasing power of the money they earned outside of India means they can enjoy a better retirement lifestyle in India compared to their host country.

You also need to decide when you are going to retire. This decision influences the investing decisions you need to make in your retirement portfolio. The sooner you start saving for your retirement, the greater the impact and benefit of compound interest.

How you will retire is up to you. Depending on the lifestyle you want after you retire, you can save money, retire early and live simply. However, the most common way of planning for your retirement is by putting money into a pension fund or retirement annuity every month. You might have a pension fund in your host country which can be transferred into an INR retirement annuity. You can also invest in the National Pension Scheme for NRIs to maximize the insurance and tax benefits.

2. Know Your Retirement Goals

Your retirement goals speak to the lifestyle you want to maintain after you have retired. Most of us want to enjoy a similar, if not better, standard of living after retiring. To achieve this, we need to plan for it.

You need to account for the expenses associated with your retirement goals. If you want to travel or take up a new hobby, plan for it. If you want to live close to your grandkids, you need to be able to afford to retire in an area close to where they live.

3. Find Investment Options in India

If you do not have a pension fund in your host country, or simply wish to diversify your portfolio, consider finding investment options in India. Doing so often allows you to maximize your insurance and tax benefits.

You can consider the following investment options in India:

• Mutual Funds – As an NRI you can invest in mutual fund schemes and monthly income plans.
• Equity – You can invest in direct equity through an account linked to your non-resident external (NRE) account or your non-resident ordinary (NRO) account.
• Fixed Deposits – A fixed deposit linked to your NRE allows you to get tax-free interest.
• National Pension Scheme – If you invest in the National Pension Scheme as an NRI you get the same insurance and tax benefits as a resident.
• Real Estate – Although you cannot own agricultural land as an NRI, you can invest in residential and commercial properties.

4. Avoid the Common Mistakes

Do not start saving for your retirement late in life. You need to save and invest at every opportunity. The earlier you start saving for your retirement the longer and harder your money works for you. Compound interest is at its most powerful over a long time.

Estimate your retirement budget as accurately as possible. If you underestimate your retirement expenses, you may make bad investing decisions early on.

You need to account for investment risk when planning for your retirement. A more volatile, high-risk portfolio can produce good growth early on in your investment scheme. But as you near retirement age, you want to protect yourself from risk and invest in retirement funds that will consistently pay out your benefits.

And a final tip – keep your documentation updated for hassle-free investing.

Conclusion

There are many options available to you as an NRI planning for your retirement. Once you have decided on the where, when, and how of your retirement you can start planning.

The sooner you start saving for retirement, the better. Careful planning is required to make sure you have a well-balanced investment portfolio. Research investment options in India to maximize your insurance and tax benefits. It will take a little bit of forethought and planning, but you can make your money work for you!