Retiring With All Your Savings in FDs? Experts Warn Why It May Hurt Your Long-Term Wealth

For decades, retirees in India have relied on fixed deposits (FDs) as the foundation of their post-retirement financial security. FDs feel safe, familiar and predictable—especially when the monthly salary stops. But financial planners warn that this comfort-driven strategy may silently erode long-term wealth in retirement.

The Hidden Problem with FD-Heavy Retirement Portfolios

According to experts, the biggest risk is not market volatility – it’s inflation.

N. ArunaGiri, CEO of TrustLine Holdings, says most retirees underestimate how quickly inflation can eat into fixed income returns. “Post-tax deposit yields usually fail to beat inflation. Over the years, this reduces purchasing power and weakens retirement compounding,” he explains.

Relying too heavily on low-yield assets like FDs locks retirees into returns that cannot keep pace with rising healthcare costs, utilities, and everyday living expenses.

Why the “FD Comfort Zone” Is Misleading

FDs also create what planners call an illusion of liquidity. While the money feels easily accessible, premature withdrawals invite penalties, and interest rates fluctuate with market cycles — often leaving retirees stuck in outdated rates for years.

Add rising life expectancy, and a 20–30 year retirement horizon becomes a serious financial challenge.

A Better Structure: Protect the Near Term, Grow the Long Term

ArunaGiri suggests a more balanced strategy rather than putting the majority of savings into deposits.

His advice:

• Keep 3–4 years of essential expenses in liquid, low-risk instruments like short-term debt funds or FDs

• Invest the remaining corpus in equities and growth assets to capture long-term compounding

This model ensures retirees never need to withdraw from equity investments during market downturns — a move that often causes irreversible long-term damage.

Periodic Resets Strengthen Stability

The structure works best when reviewed every three to four years.

A reset helps:

• Refill the liquidity bucket

• Rebalance the equity portion

• Adjust for inflation and changing expenses

• Align the portfolio with market cycles

"It is a simple but powerful way to make retirement portfolios recession-proof," ArunaGiri adds.

Avoiding Extreme Approaches

Planners emphasise why many retirees end up trapped:

• 100% in deposits: Fails to beat inflation

• Too much equity: Causes anxiety and forces panic selling

A blended model balances both — offering stability for immediate needs and growth for long-term security.

Why This Matters Now More Than Ever

With people living longer and retirement spanning 20–30 years, long-term compounding becomes essential. Safety alone cannot sustain decades of expenses.
A strategic, goal-oriented allocation gives retirees confidence and financial resilience.

(Disclaimer: Expert opinions mentioned are independent views. Always consult a qualified financial advisor before making investment decisions.)