Anup and Ankita Patil (an illustrative profile) live in Nashik. Anup is 58 and retires in two years with a corpus of about ₹2 crore spread across EPF, NPS, mutual funds and fixed deposits. Ankita is 55; she ran the household budget for 30 years but has never logged in to a single investment account. The family has always relied on Anup's employer health policy.
The corpus looks healthy. Whether it lasts depends on three things: whether a medical bill can drain it, the order in which they spend each pot, and whether Ankita could run the plan alone if she had to.
In this chapter
- What one uninsured hospital bill does to retirement income
- The order in which to draw on each pot, with a worked year-one paycheque
- How to plan for the surviving spouse, income source by income source
- A simple yearly review checklist
1. Health cover: in place before the last working day
A short recap: employer group cover usually ends when you retire, and a new personal policy may come with waiting periods for pre-existing conditions. Buying your own cover a few years before retirement lets those waiting periods run out while you are still earning. How to choose the cover, the sum insured and the fine print is explained in Health insurance: floater, top-ups and the fine print.
The retirement-specific point is what an uninsured bill does to the income engine. At a 3.5% withdrawal rate, every ₹10 lakh taken out of the corpus removes about ₹35,000 a year, roughly ₹2,900 a month, of income for the rest of retirement. Keep a separate medical buffer for deductibles and exclusions, so these do not come out of the income buckets either.
2. A withdrawal order that lasts
Most retirees hold several pots: pensions and annuities, small-savings schemes, deposits, mutual funds, PPF and perhaps an NPS balance not yet withdrawn. The order in which you spend them affects how long the money lasts and how much tax you pay. A sensible default:
- Fixed income first. Pension, annuity, SCSS and POMIS interest, and rent arrive anyway and are taxed whether you spend them or not, so let them pay for essentials.
- Cash bucket next. Top up the gap from Bucket 1 (the income bucket of two to three years' spending described in Chapter 5).
- Refill through SWPs. A systematic withdrawal plan from debt, hybrid and equity funds is taxed only on the gain part of each withdrawal. Keeping a year's long-term equity gains within the ₹1.25 lakh exemption is a useful target.
- Tax-sheltered pots last. A deferred NPS balance, or a PPF account extended after maturity, keeps growing without yearly tax. Draw on them later, or in a year when markets are down.
In a bad market year you may swap steps 3 and 4. Tax rules for each source are in the Tax for Investors module; the point here is to decide the order once and write it down, so neither spouse has to improvise.
Worked example: the Patils' first-year paycheque
Assumptions (illustrative): spending ₹70,000 a month, or ₹8.4 lakh a year. Anup puts ₹30 lakh into SCSS at 8.2% and the couple put ₹15 lakh into a joint POMIS account at 7.4% (rates for October to December 2026). He buys a ₹20 lakh NPS annuity at an assumed 6.5%. About 35% of each SWP withdrawal from equity-oriented funds held over 12 months is gain.
- Fixed income. SCSS: ₹30 lakh × 8.2% = ₹2.46 lakh. POMIS: ₹15 lakh × 7.4% = ₹1.11 lakh. Annuity: ₹20 lakh × 6.5% = ₹1.30 lakh. Total ≈ ₹4.87 lakh.
- The gap. ₹8.4 lakh − ₹4.87 lakh = ₹3.53 lakh, drawn from Bucket 1 and refilled by SWP.
- Gain inside the SWP. ₹3.53 lakh × 35% ≈ ₹1.24 lakh of long-term gain, just within the ₹1.25 lakh exemption, so no capital gains tax on it.
- Taxable income. The ₹4.87 lakh of interest and annuity is taxable at slab rates, but at this level it falls well within the new regime's rebate threshold, so the year's tax is likely to be nil.
One caution for couples: income on money you gift to your spouse is generally added back to your own income (the clubbing rule). Splitting investments between two names cuts tax only when each spouse invests their own savings.
3. Plan for the surviving spouse
A couple's plan has to last for the second lifetime, not the first. Ankita is three years younger than Anup, and women in India tend to live longer than men. If they plan to her age 92, the corpus must last 35 years from Anup's retirement, not 25.
Next, check what each income source pays on the first death. This is where many plans quietly break.
| Income source | What usually happens on the first death | What to check now |
|---|---|---|
| Single-life annuity | Income stops; nothing further unless return of purchase price was chosen | Whether the survivor can live without it |
| Joint-life annuity | Continues to the surviving spouse | That the spouse is named correctly on the policy |
| EPS pension from EPFO | A family pension, usually lower, is payable to the spouse | That the spouse's details are on record with EPFO |
| SCSS | The account normally closes and proceeds go to the nominee; an eligible spouse who is joint holder or sole nominee may be able to continue it | Joint holding or nomination in favour of the spouse |
| Mutual funds, FDs and demat | Transfer to the joint holder or nominee after paperwork | Joint holding or nominee on every folio and account |
Then estimate the survivor's income. If Anup's ₹1.3 lakh-a-year annuity were single-life, it would stop on his death; household spending usually falls only modestly, so the gap would have to come from the corpus. Many couples choose a joint-life annuity, or keep a larger stability bucket, precisely to cover this. Nomination and Will basics are explained in Claims, nominations and keeping policies in order.
Finally, make sure either spouse can run the plan. Keep a one-page "where everything is" file: every account and policy, service contacts, login hints (never passwords) and where originals are kept. Let the less involved spouse handle the yearly SWP or SCSS paperwork at least once, with the other beside them. Read more in retirement planning for couples.
4. Review every year
| Check | What to look at |
|---|---|
| Spending | Has actual spending changed? Update the target and the withdrawal amount. |
| Withdrawal rate | Is it still around 3 to 4% of the corpus? Skip the inflation increase after a bad year. |
| Buckets and order | Does Bucket 1 hold 2 to 3 years of spending? Is the written withdrawal order still right? |
| Survivor test | Could either spouse live on what remains if the other died this year? |
| Rules and documents | Any change in tax law, NPS rules or small-savings rates? Are nominations, the Will and the 'where everything is' file current? |
Common mistakes to avoid
- Relying on employer health cover until the last day. It usually ends at retirement.
- Spending from whichever account is easiest. Breaking a tax-sheltered pot first, or selling equity in a crash, can shorten the life of the corpus.
- Planning to the older spouse's life expectancy. The money has to last for the survivor, often several years longer.
- One spouse knowing everything. If the other cannot operate the accounts, the family faces delay at the worst time.
Try this yourself: Take ten minutes with your spouse. List every retirement income source and mark what each pays the survivor. Write your withdrawal order in four lines. Check whether your health cover ends when you retire. Any 'not sure' is the first item to fix, and the financial planner can help you model the survivor's income.
Frequently asked questions
Which investments should I withdraw from first after I retire?
Most retirees spend fixed income such as pension, annuity and SCSS interest first, then a cash bucket refilled by SWPs from mutual funds. Pots that grow without yearly tax, such as an extended PPF or a deferred NPS balance, are usually left for later. In a weak market year, draw more from stable pots and less from equity.
Can a retired couple pay less tax by holding investments in both names?
Only when each spouse invests their own money; income on money gifted to a spouse is generally clubbed back to the giver. Where both have their own savings, two sets of slabs and exemptions can lower the household's tax.
How long should a couple's retirement plan last?
Until the younger or longer-living spouse reaches the early nineties, as a cautious assumption. For a couple with a three or four year age gap, that often means 35 years or more from the first retirement date, so test the plan over that full period.
What should a spouse do first after a partner dies in retirement?
Secure income first: inform the pension provider and annuity insurer, and keep Bucket 1 for living costs. Then use the "where everything is" file to start transmission of each account, and delay big investment decisions for a few months.
You have completed the module: You now have a framework for any age: start from expenses, size the corpus, use the right building blocks, give NPS a clear role and plan its exit, draw income through buckets, and protect it with health cover, a written withdrawal order, survivor planning and yearly reviews. If you would like help applying this to your own numbers, book a free review with the Money n Wealth team.
Ready to apply it? Book a free review, or see the countdown steps in The Pre-Retiree if retirement is less than ten years away.