The dream of early retirement is becoming increasingly popular in India. The idea of quitting your job, living on your investments, and enjoying financial freedom sounds perfect. This concept, known as FIRE (Financial Independence, Retire Early), originated in the United States and is built around a simple formula – save 25 times your annual expenses and withdraw 4% every year after retirement.

But the big question is: Does the 4% rule really work in India? Financial experts say no – and the reasons are very important for Indian investors to understand.

The 4% withdrawal rule was introduced by American financial planner William Bengen. According to his research, if a retiree withdraws 4% of their retirement corpus in the first year and then increases that amount every year based on inflation, their money should last at least 30 years.

For example, if someone has $1 million, they can withdraw $40,000 in the first year and adjust future withdrawals for inflation. This rule was created based on US market data, US inflation trends, and US social security systems.

That is exactly where the problem begins for Indian retirees.

India’s economic structure is very different from the US. Inflation in India is generally higher and more volatile. While the US has historically seen inflation around 2–3%, India’s average inflation stays around 5–6%, and in areas like healthcare, housing, and education, it can go as high as 8–10%.

This means your expenses rise much faster in India than in developed countries.

Let’s assume Ramesh plans to retire early and expects his annual expenses to be ₹12 lakh.
Using the FIRE formula, he would need ₹3 crore (12 lakh × 25).

If he withdraws 4% every year and increases withdrawals by 6% to match Indian inflation, and his investments give him 7% returns, his retirement fund will run out in about 29 years.

That means if he retires at 50, his money could finish by the time he is 79 – which is risky considering increasing life expectancy and rising medical costs.

Financial experts believe that the 4% rule is too optimistic for Indian conditions.

Instead of stopping work completely, consider:

• Part-time consulting




• Freelancing




• Rental income




• Online businesses

Even a small regular income can significantly reduce pressure on your investment portfolio.

Indian experts suggest that instead of 25 times your annual expenses, you should aim for:

So if your annual expense is ₹12 lakh, your target should be:

• ₹4.2 crore to ₹4.8 crore

This larger buffer helps you manage inflation, medical emergencies, and market fluctuations.

Financial planners clearly state that the FIRE formula needs Indian customization. High inflation, rising healthcare costs, and lack of social security make early retirement risky if planning is not conservative.

They advise:

• Keeping emergency funds




• Having health insurance + top-up cover




• Investing across equity, debt, and real assets




• Reviewing your plan every 2–3 years

Early retirement in India is not impossible, but blindly following the US-based 4% rule can be dangerous. Indian investors must plan with higher inflation, longer lifespans, and higher medical costs in mind.

If you truly want financial freedom, think bigger corpus, flexible income, and realistic expectations. The goal is not just to retire early, but to retire stress-free.