- 5 min
Mistakes NRIs Should Avoid in Retirement Investment Planning
Written by
Kashish Manjani
- Blog
- Financial Planning
Date
26 Nov 2025
Kashishmanjani
@Kashishaikeyam
YouTube
Kashishaikeyam
Introduction: Why NRI Retirement Planning Is More Complex
NRIs face a different financial reality compared to resident Indians. You’re dealing with dual-country taxation, FEMA restrictions, repatriation limits, and currency volatility.
Many NRIs assume their higher foreign income automatically translates to a comfortable retirement. It doesn’t. Without proper planning, you can end up making costly retirement investment mistakes that erode your corpus significantly.
Countries like the US have structured systems like 401(k) and IRAs that guide residents through retirement planning.Many common retirement investment mistakes apply universally, like starting too late or withdrawing too aggressively.
This blog covers 13 retirement investment mistakes and how to avoid them, specifically for NRIs juggling investments across borders. These are the common retirement investment mistakes that can cost you lakhs, even crores, if left unchecked.
Avoid these mistakes, and your retirement will be secure. Ignore them, and you’ll face financial stress when you should be enjoying your golden years.
Mistake 1: Underestimating How Much They Need to Retire
Most NRIs guess their retirement corpus without proper calculation. “I’ll need ₹2 crores” sounds reasonable until you factor in inflation, longevity, and lifestyle costs.
The Real Calculation
How much to invest for retirement depends on multiple factors:
- Factor 1: Annual Expenses. Calculate your current annual expenses. Multiply by the number of retirement years (assume living till 85-90).
- Factor 2: Inflation. India’s average inflation is 5-6%. Healthcare inflation runs higher at 10-12%. Your ₹50,000 monthly expense today will be ₹1.65 lakhs monthly after 25 years at 5% inflation.
- Factor 3: Life Expectancy. With better healthcare, people live longer. Plan for at least 25-30 years post-retirement.
- Factor 4: Healthcare Costs Medical expenses spike after 60. Factor in ₹10-15 lakhs annually for health insurance and out-of-pocket costs.
- Factor 5: Lifestyle Will you travel? Support children? Maintain multiple properties? These add to your required corpus.
Basic Formula: Annual retirement expense $\times$ Number of retirement years $\times$ Inflation factor = Required corpus
Most NRIs underestimate by 30-40%. They calculate today’s costs, not inflation-adjusted future costs.
Use online retirement calculators.
Input realistic numbers. Don't guess, calculate.
Mistake 2: Not Applying the 4% Withdrawal Rule
Many NRIs withdraw aggressively from their retirement corpus because living costs abroad are high. This depletes savings too quickly.
What is the 4% Rule in Retirement Investing?
The 4% rule states you can safely withdraw 4% of your retirement corpus annually, adjusted for inflation, without running out of money for 30 years.
Example: If you have ₹2 crore corpus, withdraw ₹8 lakhs in Year 1. In Year 2, adjust for inflation: ₹8.4 lakhs at 5% inflation.
Why 4%? Based on historical data, a balanced portfolio (60% equity, 40% debt) grows at 8-10% annually. Withdrawing 4% leaves enough for growth to outpace inflation.
Why NRIs Violate This Rule
- Reason 1: Higher Living Costs Abroad. Living in the US, UK, Canada, or Australia is expensive. NRIs withdraw 6-8% annually, thinking their corpus is large enough.
- Reason 2: Currency Conversion When you convert INR to foreign currency, the purchasing power drops. You feel compelled to withdraw more.
- Reason 3: No Alternative Income. If you don’t have pension income or rental income, you’re forced to withdraw higher amounts.
The Solution
Plan your corpus large enough to support 4% withdrawals. If you need ₹15 lakhs annually, target a corpus of ₹3.75 crores ($\text{₹}15\text{L} \div 0.04$).
Understanding how to manage investments in retirement means disciplined withdrawals. Overspending early leaves you vulnerable later.
Mistake 3: Over-Reliance on Real Estate
Real estate is emotional for Indians. “Land never loses value” is a common belief. But for retirement planning, real estate creates more problems than solutions.
Why Real Estate Fails as a Retirement Asset
- Problem 1: Poor Liquidity. You can’t sell 20% of your property when you need cash. You have to sell the entire property, which takes months.
- Problem 2: Low Rental Yields Rental yields in Indian metros are 2-3%.That’s lower than fixed deposit returns. Your ₹1 crore property generates only ₹2-3 lakhs annual rent.
- Problem 3: Maintenance Costs Property tax, society charges, and repairs eat into rental income. Vacant periods add to losses.
- Problem 4: Legal Hassles Tenant disputes, property documentation issues, and succession planning across countries complicate matters.
- Problem 5: Emotional Attachment Selling ancestral or self-bought property feels wrong emotionally, even when financially necessary.
The Better Approach
Limit real estate to 20-30% of your portfolio. Diversify the rest into equity, debt, and global assets.
If you own property, ensure it’s income-generating. A vacant ancestral home in a tier-2 city has zero retirement value.
This is one of the most common retirement investment mistakes that NRIs make due to emotional bias.
Mistake 4: Violating or Ignoring FEMA Rules
Many NRIs unknowingly violate FEMA regulations, leading to penalties and blocked investments.10
Common FEMA Violations
- Violation 1: Continuing PPF Contributions NRIs cannot contribute to PPF after acquiring NRI status. Existing accounts can continue till maturity, but no new deposits. Many NRIs keep depositing, thinking the account is valid. This is illegal.
- Violation 2: Holding Resident Savings Accounts. You must convert your resident savings account to NRO or NRE within a reasonable time of becoming an NRI. Continuing to use resident accounts violates FEMA.
- Violation 3: Investing in KVP, NSC, or Other Restricted Schemes NRIs cannot invest in Kisan Vikas Patra, National Savings Certificates, or certain postal schemes. Existing investments can mature, but renewals are not allowed.
- Violation 4: Receiving Income in Resident Accounts If you receive rental income, pension, or dividends in India, it must go into an NRO account, not a resident account.
The Solution
- Step 1: Immediately convert resident accounts to NRO/NRE based on your needs.
- Step 2: Stop contributing to restricted schemes. Let existing investments mature and transfer funds to compliant options.
- Step 3: Consult a CA familiar with FEMA to audit your investments.
Ignoring FEMA is one of the investment mistakes you must avoid. Penalties and legal issues create unnecessary stress during retirement.
Mistake 5: Not Leveraging DTAA to Avoid Double Taxation
NRIs often pay tax twice—once in their country of residence and again in India—because they don’t understand Double Taxation Avoidance Agreements (DTAA).
How Double Taxation Happens
You earn rental income in India: ₹10 lakhs annually. India taxes it at 30%. Your country of residence also taxes your global income, including this rental income. You end up paying 30% in India and another 20-30% abroad. Total tax: 50-60%.
How DTAA Helps
India has DTAA treaties with over 90 countries. These treaties specify which country has the primary right to tax specific income. For rental income, India typically has primary taxing rights. You pay tax in India. Then claim tax credit in your country of residence to avoid double tax.
Documents Required
- Tax Residency Certificate (TRC): Issued by your country of residence. Proves you’re a tax resident there.
- Form 10F: Submit to Indian tax authorities along with TRC to claim DTAA benefits.
- Tax Credit Claims: File in your country of residence showing taxes already paid in India.
Why NRIs Miss This
- Reason 1: Lack of Awareness Most NRIs don’t know DTAA exists or how to use it.
- Reason 2: Documentation Hassle Getting TRC and filing claims across countries feels complicated.
- Reason 3: No Professional Help. They handle taxes themselves without consulting cross-border tax experts.
The Cost
Double taxation reduces your effective returns by 20-30%. On a ₹50 lakh retirement corpus generating ₹4 lakh annual income, you lose ₹80,000-₹1.2 lakh annually. Over 20 retirement years, that’s ₹16-24 lakhs lost unnecessarily.
Hire a cross-border tax consultant. The fee is minor compared to the savings.
Mistake 6: Over-Investing in One Country (India or Abroad Only)
Many NRIs invest 100% in India or 100% in their country of residence. Both approaches are risky.
The India-Only Portfolio Risk
You’re exposed entirely to Indian market volatility, INR depreciation, and India-specific economic risks. If you plan to retire in India, this might seem logical. But what if your children settle abroad and you need to move later?
The Foreign-Only Portfolio Risk
You’re exposed to that country’s economy and currency. If you plan to retire in India, your purchasing power depends on INR-foreign currency exchange rates. A ₹50 lakh corpus in USD might seem large, but if USD-INR drops or you need INR for India expenses, you face conversion losses.
The Solution: Global Diversification
Understanding how to invest your retirement money means spreading across geographies:
- 40% in India:
- Equity mutual funds (large cap, multi-cap)
- NPS (Tier 1 for retirement)
- Senior Citizen Savings Scheme (post-retirement)
- 40% in Country of Residence (e.g., US/UK/UAE):
- 401(k) / Superannuation / ISA (employer-sponsored plans)
- Index funds / ETFs
- Government bonds
- 20% in Global Assets:
- US/International equity funds
- Gold (hedge against currency risk)
- Global bond funds
This balance protects you regardless of where you retire.
Many NRIs working in the US make retirement investment mistakes by not diversifying beyond 401(k). Similarly, those in the UAE over-rely on savings without proper India exposure.
Mistake 7: Ignoring Currency Risk
Currency fluctuations can significantly impact your retirement corpus. NRIs often ignore this until it’s too late.
How Currency Risk Affects You
- Scenario 1: INR Depreciation You earn and save in USD. You plan to retire in India. INR depreciates 30% over 20 years. Your $100,000 corpus was worth ₹75 lakhs when you started planning. Due to depreciation, it’s now worth ₹1 crore. Sounds good? But inflation in India was 6% annually. Your purchasing power barely kept pace. You didn’t gain, you just maintained.
- Scenario 2: Foreign Currency Volatility You save in INR but live abroad. Your home country’s currency strengthens against INR. Your ₹1 crore corpus buys less in your country of residence than you planned.
Understanding What is a Realistic Return on Retirement Investments
You need to factor in:
- Investment returns: 8-10% on a balanced portfolio
- Inflation: 5-6% in India, 2-3% abroad
- Currency depreciation: 2-3% annually for INR against major currencies
$$\text{Real return} = \text{Nominal return} – \text{Inflation} – \text{Currency impact}$$
If you earn 10% in India but INR depreciates 3% against your retirement country’s currency, your real return is effectively 7% before inflation.
The Solution
- Hold 50-60% in Your Retirement Country’s Currency: If retiring in India, keep the majority in INR assets. If retiring abroad, keep the majority in that currency.
- Use Natural Hedges: Assets in India (real estate, equity) naturally hedge against INR depreciation if you’re retiring there.
- Consider Currency Hedged Funds: Some international funds offer currency hedging options.
- Review Every 3 Years: Rebalance based on currency movements and retirement proximity.
Mistake 8: Not Planning for Health Insurance & Long-Term Care
Most NRIs rely solely on employer-provided health insurance. This is a critical financial mistake retirees make.
The Problem with Employer Insurance
- Issue 1: Coverage Ends Post-Employment. When you retire or leave your job, coverage stops. Getting new health insurance after 50-55 is expensive.
- Issue 2: No Coverage for Pre-Existing Conditions. New policies have 2-4 year waiting periods for pre-existing diseases. If you develop diabetes or hypertension during employment, you’re uninsured post-retirement.
- Issue 3: Geographic Limitations Employer insurance often covers only your country of employment. If you retire in India, it’s useless.
The Solution
- Step 1: Buy Standalone Health Insurance Early. Purchase comprehensive health insurance by age 40-45 when premiums are lower.
- For India Retirement: Buy a family floater with ₹25-50 lakh coverage. Add a super top-up for additional ₹50 lakh coverage. Choose plans with lifetime renewability.
- For Abroad Retirement: Get expatriate health insurance or international health plans. Ensure coverage continues post-retirement.
- Step 2: Plan for Long-Term Care. After 70-75, you might need assisted living, home nursing, or care facilities. These cost ₹30,000-₹1 lakh monthly. Factor this into your retirement corpus. Allocate ₹50 lakhs-₹1 crore specifically for long-term care.
- Step 3: Consider Critical Illness Insurance that covers cancer, stroke, and heart attack treatment. Provides a lump sum on diagnosis.
Healthcare is the biggest unplanned expense in retirement. Plan for it explicitly.
Mistake 9: Not Planning Repatriation of Funds
Many NRIs earn and save abroad but plan to retire in India. Moving money back becomes complicated without proper planning.
Common Repatriation Problems
- Problem 1: NRO Account TDS Interest earned in NRO accounts has 30% TDS. For high balances, this significantly reduces your effective return.
- Problem 2: Repatriation Limits You can repatriate up to $1 million per financial year from NRO accounts. Requires CA certification and Form 15CA/15CB filing.
- Problem 3: Incomplete Documentation Banks reject repatriation requests due to missing source documents, incorrect forms, or tax non-compliance.
- Problem 4: Timing Issues Repatriation takes 2-4 weeks. If you need urgent funds during retirement, delays create problems.
The Solution
- Step 1: Plan Fund Movement Before Retirement. Don’t wait till retirement to repatriate. Start moving funds 2-3 years before retirement in tranches.
- Step 2: Use NRE Accounts for Repatriable Funds. Keep funds you plan to repatriate in NRE accounts. These are fully repatriable without limits. NRO is for India-sourced income (rent, dividends). NRE is for foreign-sourced income (salary, savings).
- Step 3: Maintain Tax Records. Keep all tax returns, Form 26AS, and TDS certificates. You’ll need these for repatriation documentation.
- Step 4: Hire a CA for Form 15CA/15CB. Don’t DIY. CA certification is mandatory. Hire professionals familiar with repatriation.
Plan your fund movement strategy as part of retirement planning. Last-minute repatriation creates unnecessary stress.
Mistake 10: No Estate Planning Across Countries
NRIs with assets in multiple countries need separate estate planning for each jurisdiction. Many ignore this until it’s too late.
Why Cross-Border Estate Planning Matters
- Issue 1: Different Succession Laws India has different succession laws from Western countries. What applies to your UK property doesn’t apply to your Mumbai flat.
- Issue 2: Probate Delays. Without a proper Will and nomination, your heirs face years of legal battles to access assets.
- Issue 3: Tax Implications. Some countries have estate taxes (inheritance tax).Without planning, your heirs lose 30-40% of assets to taxes.
The Solution
- Step 1: Create Separate Wills. Have one Will for Indian assets and another for foreign assets. Each Will should be valid in that jurisdiction.
- Step 2: Update Nominations. Update nominees on all accounts: Bank accounts (NRE, NRO, savings), Investment accounts (Demat, mutual funds), Insurance policies, Retirement accounts (PF, NPS, 401k, Superannuation).
- Step 3: Appoint Power of Attorney If you’re abroad and have assets in India, appoint a trusted relative with a POA to manage them.
- Step 4: Inform Your Family. Your heirs should know what assets exist and where documents are stored. Create an asset inventory.
- Step 5: Review every 3-5 Years, Laws change. Family situations change. Review and update estate plans regularly.
This is part of the top 10 retirement mistakes globally. Don’t leave your family struggling with legal issues after you’re gone.
Mistake 11: Delaying Retirement Planning
“I’ll start planning after I turn 40” or “Let me first settle the kids” are common excuses. Delaying costs you lakhs due to lost compounding.
What are the 3 R’s of Retirement?
The 3 R’s framework helps you understand retirement planning holistically:
- Reduce: Reduce your expenses. As you near retirement, cut unnecessary costs. Downsize housing if needed. Simplify lifestyle.
- Replace: Replace your employment income with passive income, dividends, interest, rental income, pension. The goal is income continuation, not just corpus accumulation.
- Reinvent: Reinvent your lifestyle. Retirement isn’t just about money. It’s about purpose, health, relationships, and activities. Plan for non-financial aspects too.
What is the 7 Rule for Retirement?
The Rule of 72 helps you understand compounding. Divide 72 by your expected return to know how many years it takes to double your money.
At 10% return: $72 \div 10 = 7.2$ years to double.
Example:
| Age | Corpus (at 10% CAGR) |
|---|---|
| 30 | Start with ₹10 lakhs |
| 37 | Doubles to ₹20 lakhs |
| 44 | Doubles to ₹40 lakhs |
| 51 | Doubles to ₹80 lakhs |
| 58 | Doubles to ₹1.6 crores |
If you delay starting by 10 years (start at 40 instead of 30), you lose the first two doubling cycles. You’d reach only ₹40 lakhs by 58 instead of ₹1.6 crores.
The Cost of Delay
Starting at 25 vs. 35:
- Invest ₹10,000 monthly from age 25 to 60 (35 years) at 12% CAGR = ₹6.44 crores
- Invest ₹10,000 monthly from age 35 to 60 (25 years) at 12% CAGR = ₹1.89 crores
Difference: ₹4.55 crores
That 10-year delay costs you ₹4.55 crores. You can never fully recover that lost time.
Understanding how to manage money in retirement starts with early planning. The earlier you start, the less you need to save monthly.
Mistake 12: Not Taking Advice From NRI-Specialised Financial Planners
Cross-border financial planning is complex. DIY investing works for simple cases, not for NRIs with assets in multiple countries.
Why Generic Advisors Fail for NRIs
- Problem 1: They Don’t Understand FEMA Resident Indian advisors suggest PPF, EPF, or NSC—all restricted or complicated for NRIs.
- Problem 2: They Ignore Tax Treaties. They don’t know DTAA provisions or how to structure investments for tax efficiency across countries.
- Problem 3: They can’t guide on Foreign Assets. They don’t understand 401(k), Superannuation, or ISA—common retirement vehicles abroad.
- Problem 4: They Miss Repatriation Planning. They don’t factor in how you’ll move money back to India post-retirement.
What NRI-Specialised Planners Offer
- Expertise 1: Cross-Border Tax Planning. They structure your portfolio to minimise tax in both countries using DTAA benefits.
- Expertise 2: FEMA Compliance. They ensure all investments are FEMA-compliant, avoiding legal issues.
- Expertise 3: Global Asset Allocation. They recommend the right mix of Indian and foreign assets based on your retirement location.
- Expertise 4: Repatriation Strategy. They plan fund movement, timeline and documentation years before retirement.
- Expertise 5: Estate Planning Across Jurisdictions. They coordinate Wills, nominations, and succession planning across countries.
The Cost of DIY Mistakes
| Mistake Type | Potential Loss Over 20 Years |
|---|---|
| Tax Mistakes | 20–30% loss annually on income |
| FEMA Violations | Penalties + blocked funds |
| Poor Asset Allocation | 3–5% lower returns due to lack of diversification |
| Repatriation Delays | Stuck funds when you need them |
A ₹1 crore corpus managed poorly vs. professionally can result in a ₹20-30 lakh difference over 20 years.
Finding the Right Advisor
Look for:
- SEBI-registered investment advisors
- Certification in cross-border planning (CFP, CFA with India-abroad experience)
- Experience working with NRI clients specifically
- Transparent fee structure (fee-only, not commission-based)
Yes, you’ll pay ₹25,000-₹75,000 for comprehensive planning. But the savings and peace of mind are worth multiples of that fee.
This is perhaps the most critical of all retirement investment mistakes in India that NRIs make when trying to handle complex cross-border finances alone.
Mistake 13: Not Leveraging the RNOR Status for Tax Planning (New)
The ‘Resident but Not Ordinarily Resident’ (RNOR) status is a powerful but time-bound tax window for NRIs returning to India for retirement. Many miss this opportunity.
What is RNOR Status?
When an NRI returns to India permanently, they pass through a transition phase of 1-3 years (depending on the specific conditions) where they are classified as RNOR.
The RNOR Tax Advantage
During the RNOR period, the NRI is taxed in India only on their Indian-sourced income (e.g., rent, interest, dividends in Indian accounts) and income received in India.
Crucially, income earned from foreign sources (e.g., interest on overseas bank accounts, rent from foreign properties, capital gains from selling foreign stocks) is NOT taxable in India under the RNOR status.
How NRIs Miss Out
- No Awareness: They don’t know the status exists or the specific conditions for qualification.
- Poor Planning: They don’t time their return or their asset sale correctly, causing foreign income to become taxable in the subsequent ‘Resident and Ordinarily Resident’ (ROR) status.
The Solution: Use the Window Wisely
- Time Your Return: Plan your India return date to maximize the RNOR period.
- Utilise the Window: Sell highly appreciated foreign assets (like US stocks or UK property) and receive the proceeds abroad during the RNOR phase. The capital gains will typically be tax-free in India.
- Repatriate Wisely: Transfer your overseas funds to your NRE account before your RNOR status expires and you become an ROR, as interest earned on NRE accounts is exempt even for RORs.
Not using the RNOR window can result in paying significant capital gains tax in India on foreign assets that could have been sold tax-free.
Conclusion
Retirement investment mistakes, especially for NRIs dealing with cross-border complexity, can be incredibly costly. The key to securing your golden years is a combination of:
- Early Start: Compounding is your biggest ally (a 10-year delay can cost crores).
- Global Diversification: Balance Indian and foreign assets to mitigate currency and market risk.
- Healthcare First: Explicitly plan for medical expenses, the largest unplanned retirement cost.
- Tax Efficiency: Leverage DTAA and the RNOR status.
- Professional Guidance: Hire NRI-specialized financial planners to navigate FEMA, repatriation, and cross-border estate planning.
By calculating your corpus accurately, following disciplined withdrawal strategies (like the 4% rule), and executing consistently, you can ensure a financially secure and stress-free retirement.
Written by
Kashish Manjani
Kashish blends strategic thinking with timeless financial principles — helping clients grow, protect, and align their wealth with their values. Kashish blends strategic thinking with timeless financial principles — helping clients grow, protect, and align their wealth with their values.
FAQs
Frequently Asked questions
What are Common Retirement Mistakes?
Underestimating corpus needs and inflation. * Delaying planning until too late. * Over-reliance on single, illiquid assets (like real estate). * Ignoring rising healthcare and long-term care costs. * Withdrawing funds too aggressively (violating the 4% rule). * Failing to optimise taxes (e.g., ignoring DTAA/RNOR).
What is the 4% Rule in Retirement Investing?
It suggests you can safely withdraw 4% of your initial retirement corpus in the first year, and then adjust that amount annually for inflation, ensuring the money lasts for 30 years. (Example: ₹2 Cr corpus $\times$ 4% = ₹8 lakhs initial withdrawal.)
What are the 3 R's of Retirement?
Reduce Expenses: Lower your required corpus by simplifying your lifestyle. 2. Replace Income: Create passive income streams (interest, rent, dividends) to substitute your salary. 3. Reinvent Lifestyle: Plan for non-financial fulfilment through hobbies, volunteering, or new activities.