how-to-replace-your-income-in-20-years-using-the-best-savings-plans

How to Replace Your Income in 20 Years Using Savings Plans?

Learn how disciplined savings plans can help replace your income in 20 years through proper corpus planning, risk management, and compounding growth.

Written by : Knowledge Centre Team

2025-10-15

4891 Views

6 minutes read

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What is retirement? It is not like you can no longer bear the burden of professional work. You may even be at the peak of your career. Your children are settled and perhaps earning their place in the world, and you have achieved almost all the financial goals of your life, except the legacy plan.

So, what is retirement really? Is it just a break from professional work?

If you look at it practically, nothing stops you from continuing in your profession for a few more years. But one thing is certain: you no longer need to work for money anymore.

Thus, retirement may not be just a break from work, but it is when you no longer depend on the income from active employment. You can retire anytime once you have built a large enough corpus to take care of your post-retirement life.

In this article, we will discuss:

  • Why replace income?

  • How much money will you need?

  • How to build the corpus?

  • Where to invest?

  • Converting your corpus into regular income

Key Takeaways

  • Replace your working income with a retirement corpus that supports your lifestyle after full‑time employment ends

  • Save around 30-35% of your income consistently over 20 years to build a meaningful retirement corpus

  • Account for inflation and a longer lifespan so your savings keep pace with rising costs and last your lifetime

  • Diversify across options like NPS, EPF, ULIPs, and long‑term debt or retirement‑oriented mutual funds

  • Plan safe monthly withdrawals and use annuity or systematic withdrawal strategies to generate steady post‑retirement income

Why Should You Replace Your Income?

You need to replace income to take care of your expenses after retirement. The monthly budget for your household will look quite different from today because of the following changes:

You may be paying your child’s school and University fees in your 40’s and 50’s, but that will cease when your child grows up. In the same manner, children’s living expenses will also stop once they become independent. Children grow up, start earning, and living on their own. All related lifestyle expenses on them would come down to zero after a certain age.

Costs of commuting, lunch, and other expenses related to the workplace would also no longer exist as you spend more time at home and very little time outside. Lifestyle expenses may also see a cut if you prefer.

The only major cost that could still burn a hole in your pocket is healthcare. Available empirical evidence shows that inflation in the food and healthcare segments has been higher than the overall average rate of inflation. Moreover, the probability of you and your spouse needing more medical attention in old age is higher. Therefore, you must account not only for a larger share of your budget going to healthcare, but also for the impact of higher inflation on these expenses.

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How Much Money Will You Need?

The estimated cost of living for you and your spouse is usually about 20-30% of your monthly income. The remaining money is either spent as a lifestyle cost or saved for future needs.

So, if you are earning ₹1 lakh now, you are spending about ₹20-30,000 on yourself and your spouse. This is the amount that will translate into personal expenses post-retirement as well.

This amount adjusted for inflation (say, within the range of 3-4% p.a.) could go up to ₹90,000 in 30 years. So, if you are 30 years old now, this is the amount you will need to start your retirement at 60. However, if you wish to retire at 50, you may withdraw a relatively lower amount of approximately ₹80,000.

However, you will then have a longer retirement period to take care of, plus you may still need to take care of a few financial goals. Thus, if you can secure an income slightly higher than ₹90,000, say ₹1 lakh per month after your retirement, you may have an easier life ahead.

Also, this income has to account for future inflation. So, every year, you should be able to withdraw a progressively higher amount. To sustain such a post‑retirement income starting at age 50, a sizeable corpus in the range of about ₹2.8 crore or more may be required, depending on the assumed rate of return and expected lifespan.

How to Build the Retirement Corpus?

If the inflation and rate of interest figures remain the same, saving about 35% of your salary should be enough to build an adequate retirement corpus for you in 20 years. Meaning, you can replace your current income within 20 years if you save 35% of your income towards this goal.

Learn why should you consider inflation while planning for retirement.

The next natural question is, ‘Where to invest?’ So, here are the best retirement saving plans you can explore:

  • NPS & EPF Investments: If you are a subscriber to any of these retirement schemes, you are already contributing 10- 12% of your income towards your retirement. With NPS, you can contribute up to ₹50,000 more each year, free of tax. However, to invest more, you will need other investment options.

    As a self-employed investor, you can invest in an NPS Tier-I account. The limit for self-employed investors is 20% of annual income. Thus, you will need to allocate only the remaining 15% to other investment options.
  • ULIP Plan: ULIPs are one of the most versatile retirement investment plans you can use. Your money is invested in both debt and equity instruments based on your allocation.

    This allows you to gain from the dynamics of the financial markets using automated portfolio management strategies. When you are young, you can invest aggressively in equity-oriented funds and then gradually move your money to safer debt funds. Thus, the ULIP plan gives you the most tax-efficient way of building your retirement corpus.
  • Long‑Term Debt or Fixed‑Income Options: Another sensible way to bridge the gap in your retirement funding is to use long‑term, relatively stable debt‑oriented instruments such as Public Provident Fund (PPF), fixed deposits, or senior‑citizen‑oriented savings schemes. These options typically offer predictable returns and lower volatility, so you can estimate your corpus growth more reliably over time.

    This kind of allocation can balance the risk in your overall portfolio, especially as you near retirement, while still keeping your savings inflation‑adjusted and aligned with your long‑term needs
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Do you know

Did You Know?

Small annual boosts in your retirement savings rate can meaningfully increase your final corpus due to compounding over time.


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Deciding Your Monthly Withdrawal Rate

Ensuring your retirement corpus lasts as long as you need it to is very important. If you withdraw too much each month, your savings may get depleted faster than expected, especially if market returns are lower or inflation is higher. On the other hand, withdrawing too little can restrict your lifestyle and defeat the purpose of building a comfortable corpus. 

A commonly used thumb rule is to start with an annual withdrawal of around 3-5% of your corpus, adjusted periodically for inflation and portfolio performance. This range helps balance the need for regular income with the risk of running out of money, while still allowing your investments to grow over the long term.

Conclusion

Replacing income is essentially planning for retirement so that your lifestyle continues as is even after your full-time employment comes to an end. Your savings would then work as a financial nest that would give you a predictable monthly income so that you never realise that you are not employed anymore. At the same time, you can lead a cosy retired life reading your favourite books and watching all those movies that you never had time for earlier.

Glossary

  1. Retirement Corpus: Total savings and investments accumulated to fund your post‑retirement income needs.
  2. Inflation: A gradual rise in prices that reduces the purchasing power of your money over time.
  3. Monthly Withdrawal Rate: Percentage of your retirement corpus you withdraw as income each month or year.
  4. NPS: Government‑backed retirement savings scheme offering tax benefits and market‑linked returns.
  5. ULIP Plan: An insurance-linked investment product that combines life cover with market‑linked fund options.
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Uncertain About Insurance?

FAQs

Replacing your income means creating a cash flow from savings and investments that covers your living expenses after full‑time work ends. This ensures your lifestyle stays stable even though you are no longer earning a salary.

Many planners suggest saving around 30-35% of your income consistently over 20 years to build a meaningful retirement corpus. The exact amount depends on your lifestyle, inflation, and expected investment returns.

NPS and EPF are strong retirement‑focused options, but they may not be enough on their own for a comfortable lifestyle. Most people combine them with other investments like ULIPs or mutual funds to close the gap.

Inflation reduces the purchasing power of money over time, so the same amount will buy less in the future. To keep up, your retirement corpus and withdrawals must grow or be adjusted for rising prices.

You can generate regular income by using annuity plans, systematic withdrawals from mutual funds, or a mix of pension and dividend‑oriented products. Choosing the right withdrawal rate and asset mix helps your money last throughout retirement.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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