How UAE NRIs Can Build a Retirement Corpus for India

Returning to India after living several years in the UAE is both a lifestyle change and a financial transition that needs preparation. While many NRIs build a retirement corpus in the UAE, retirement comes with a new set of questions. For instance, after your return, how will you manage your UAE savings? What will you do with your NRE and NRO accounts, and more?

The simple answer to all these questions is doing proper retirement planning before your relocation. For this, consider the lifestyle you want, your expenses, investments, tax implications, income sources, and suitable retirement options.

Want a detailed overview of it? Read this blog on how UAE NRIs can build a retirement corpus before returning to India and get a clear idea of it.

Factors to Consider for Building a Retirement Corpus for UAE NRIs

Before moving on to how NRIs build a retirement corpus, first let's understand what it means. A retirement corpus is the total savings that you need to manage your expenses post-retirement for your expected retirement period. Underuse it, and you will have more savings. Overuse it, and it will affect your present life.

With that in mind, the right strategy for a retirement corpus for UAE NRIs is to base it on your current monthly expenses. Inflate your current expenses to your retirement date, multiply by your retirement horizon, and add healthcare and contingencies. Here are the key factors that help you build your retirement corpus.

Retirement Age and Post-Retirement Duration

In India-UAE retirement planning for NRIs, the most consequential thing is your retirement age. Know the difference:

• An individual retiring at 45 may need 40+ years of funds, depending on their expected retirement horizon.
• A person retiring at 60 generally plans funds for 20-25 years, depending on their expected retirement horizon.
• An individual retiring at 65 may plan funds for 15-20 years, depending on their expected retirement horizon.

Lifestyle Expectations, Location, and Legacy Goals

The table below shows an example of monthly expenses for an individual retiring at 60, with a 25-year retirement and long-term inflation. Here, the 25x annual expense rule is used as a starting estimate. Note: It is an example only; the calculation can vary.

Let's see what the above-mentioned tiers in the table cover:

• Basic Tier: It includes utilities, groceries, and home-made meals. Suitable for individuals or couples living in small cities with pension income and retirement corpus.
• Moderate Tier: Includes all household expenses, occasional travel within the country, routine medical care, and some leisure. For couples living in metro states without any pension income.
• Affluent Tier: Family support, comprehensive health coverage, international travel, and legacy corpus. Suitable for urban UHNIs and HNIs with high financial obligations.
  Further, those individuals retiring at 45 or 50 need a larger retirement corpus to cover the expenses for 30-35 years or more.

Inflation- Especially Healthcare Expenses

The long-term consumer price inflation rate in India between 2004 and 2024 has averaged ~6.5% annually. The following information is based on World Bank CPI data. Here is how it works:

• In 15 years, monthly expenses of INR 1,00,000 today could be about INR 2,60,000.
• Additionally, the same expenses in 20 years could be about INR 3,52,000 per month.

Beyond these expenses, healthcare costs inflate quickly. According to Milliman's research on medical trends in India, medical cost inflation was 12% in 2024 and was projected at 13% for 2025. This is significantly higher than the CPI rate. In simple terms, the same monthly cost of INR 1,00,000 in 20 years becomes over INR 9,65,000 per month if inflation remains at 12%.

Post-Retirement Income Sources and the Income Gap

Having a reliable source of passive income directly reduces the amount you need for your retirement corpus every year. This works like this:

*Annual corpus draw = Annual expenses - Passive income

Further, let's look at the income sources that help you reduce the gap:

Rental income from properties

• EPF
• PPF
• Dividend income, bond interest, REIT distributions
• UAE retirement or savings income
• NPS
• NRE, NRO, and FCNR deposits
• Indian mutual funds and shares
• UAE investment accounts
• Expected UAE gratuity

This was all about factors that need to be considered for the retirement corpus for UAE NRIs. Now, let's look at what should be included in the retirement corpus calculation for NRIs in India.

What Expenses Does the Retirement Corpus Need to Cover?

A retirement corpus, beyond your monthly expenses, also needs to cover other expenditures. It should cover both predictable recurring expenses and sudden large expenses that could affect your retirement life.

Recurring Expenses

Recurring expenses include the following:

• Daily Living Expenses: Utilities, groceries, transport, and household help
• Housing: Property taxes, maintenance, and, if relocating, possible rent
• Healthcare: Insurance premiums
• Family Support: Annual needs of children, regular gifting, expenses on festivals
• Leisure and Travel: Hobbies, domestic or international trips, entertainment

One-Time Costs

These can significantly impact your retirement corpus if you don't calculate them separately.

• Wedding of children or grandchildren
• Major medical surgery (oncology, cardiac)
• Assisting children during financial difficulty
• Home relocation or renovation costs
• Legal costs for estate and succession matters

For these expenses, it is advisable to consider an additional contingency buffer in your retirement corpus. A practical approach is to keep suitable short-term debt instruments and liquid funds for these sudden expenses. This way, these expenses won't disrupt your long-term financial goals.

These are the expenses NRIs should consider when calculating their retirement corpus. Now, moving ahead, let's know about the tax implications UAE-based NRIs face after returning to India.

Tax Implications UAE-based NRIs Face After Returning to India

This is the most critical thing NRIs unknowingly ignore, and it can directly affect their retirement corpus. The most important thing regarding your tax implications in India is your residential status.

This is because, as an NRI, you are generally not liable to pay tax in India on foreign-source income that does not fall within the Indian tax scope under the applicable rules. After your retirement, you are not instantly liable to pay tax on your global income. Once your RNOR status ends and you become ROR, your tax obligations change. As a resident Indian, you are liable to pay tax on:

• Global income, including UAE gratuity for NRIs where taxable in India, pension, and investment income
• Rental income (after standard deduction)
• Capital gains from mutual/ equity funds
• Interest on your Indian bank accounts and fixed deposits

Additionally, you need to redesignate your NRE and NRO accounts when your residential status changes. NRE funds may be transferred to an RFC account at your option, while NRO accounts may be redesignated as resident accounts. FCNR(B) deposits may generally continue until maturity subject to applicable RBI conditions.

Now, moving forward, let's learn how to calculate an NRI retirement corpus in India.

How to Calculate Retirement Corpus in India?

Here is how NRIs can build a retirement corpus in India:

Convert Your Retirement Goal Between INR and AED

Currency movements can also impact investment returns. For instance, an Indian investment may provide you profits in INR but offer you a smaller gain when calculated in AED. Considering this, to match AED to INR retirement planning with your future expenses, follow this approach:

• For your retirement in India, maintain your INR investments.
• For UAE and international expenses, invest in suitable foreign-currency assets.
• Avoid transferring the full investment amount to India before you need it unless it is appropriate for your retirement expenses, tax position, and investment plan.
• Gradually move money as your retirement date approaches.

The 25x Annual Expense Rule and the 4% Framework

Here is how this rule works. Determine your expected annual expenses after retirement and multiply it by 25. The result is your estimated retirement corpus based on the 25x rule. A 4% annual withdrawal is a commonly used planning framework for a 30-year retirement, but the appropriate withdrawal rate can vary based on investment returns, asset allocation, inflation, and retirement duration.

The Inflation-Adjusted Projection Method

It is a step-by-step method that provides more accurate calculations:

• Step 1: Determine your current monthly expenses. This includes your utilities, discretionary spending, EMIs, and lifestyle costs.
• Step 2: Subtract the expenses that will not be a part of your retirement. For instance, school or college fees for children, work clothing, and commuting costs.
• Step 3: Add your retirement expenses such as healthcare, travel, domestic help, and leisure.
• Step 4: Using the ~6.5% annual inflation rate, inflate the calculated amount to your retirement date.
• Step 5: To find your annual retirement expenses, multiply the amount by 12.
• Step 6: After that, multiply the amount above by your expected retirement years.
• Step 7: Consider an additional contingency buffer for unplanned expenses based on your circumstances.

Let's look at an example. Suppose your current monthly expenses are INR 80,000, and you plan to retire in 15 years. Now consider your retirement horizon to be 25 years. Here is how to

calculate your retirement corpus amount:

• Inflated monthly expenses at ~6.5% over 15 years = ~₹2,06,000 per month
• Annual requirement = ~₹24,72,000
• 25-year Total = ~₹6.18 crore
• Add 20% buffer = ~₹7.42 crore required corpus

Calculate the Gap and Required Monthly Savings

Once you get your corpus amount:

• Using an appropriate return assumption based on your asset allocation and investment horizon, estimate the future value of your present retirement savings.
• Subtract the calculated amount from your needed retirement amount. The difference is your savings gap.
• To close the savings gap, invest in options that match your financial goals.

This is how you can calculate your estimated retirement corpus. Next, let's look at why it is important to review your retirement corpus regularly.

Why Review Your Retirement Corpus Regularly?

Reviewing your retirement corpus regularly matters because the corpus calculated today won't stay the same in the future. Considering this, to overcome this issue, it is advisable to review the retirement corpus after the following changes:

• Income
• Employment
• Retirement age
• Family responsibilities
• Retirement country
• Healthcare needs
• Investment performance
• Changes in tax and FEMA rules

Also, after the changes, compare the following:

• Required retirement corpus as per your updated expenses
• Present value of your investments
• Estimated future value of investments
• Gap remaining in savings
• Required monthly contribution

If your investment portfolio is behind your retirement schedule, gradually increase your contribution rather than taking investment risk. Additionally, check for adverse conditions, for instance:

• Inflation rate is 1% higher than estimated
• Lower investment return
• Retirement starts five years earlier than the planned age
• Retirement years last five years longer
• Substantial increase in healthcare expenses
• The AED-INR rate moved against the retirement plan

Also, plan your retirement corpus based on resilience; don't assume one ideal scenario. Next, let's look at the common mistakes UAE-based NRIs should avoid when planning for retirement.

Common Mistakes that UAE-Based NRIs Should Avoid When Planning Retirement in India

Here are some common mistakes that UAE-based NRIs should avoid when planning for retirement in India:

• Delaying Savings: To increase your retirement benefits, invest early. The earlier you invest, the larger a corpus you will build.
• Do Not Over-Invest in Risky Assets: Invest in diversified assets to balance your returns and risks.
• Not Considering Currency Fluctuations: Match your investments across AED and INR with the currency of your expected retirement expenses.
• Not Diversifying Investments: To improve stability, spread your investments across different assets. For instance, your portfolio can combine equity, debt, pension products, and other investments to manage risk and support long-term returns.

Avoid these mistakes when planning your retirement in India.

Final Thoughts

Lastly, for NRIs, planning retirement across two countries is not easy. This is because tax laws, investment regulations, residency rules, and repatriation norms for NRIs shift frequently. To address this, NRIs should build a retirement corpus before returning to India. Accordingly, the retirement corpus depends on several factors, such as retirement age, lifestyle, inflation, and post-retirement income source. This varies from person to person, so plan accordingly.

Facing issues in planning your retirement? At Savetaxs, we help NRIs plan their retirement in their chosen country as per their financial goals and lifestyle. We also guide them on their tax obligations after retirement. So connect with us and stay stress-free about your retirement corpus.