Retirement planning with US ETFs: A guide for Indian millennials
Most Indian millennials have no employer-provided pension awaiting them at retirement. The burden of building a retirement corpus falls entirely on the individual. U.S. ETFs offer a powerful solution with ultra-low expense ratios, broad market access, and built-in currency diversification against rupee depreciation. A single fund like VOO tracks the S&P 500 at just 0.03% annual cost. That translates to ₹30 per year on every ₹1 lakh invested.
The RBI's Liberalised Remittance Scheme (LRS) allows Indian residents to invest up to $250,000 per financial year in overseas assets. This limit gives millennials ample room to build a meaningful retirement corpus in U.S. ETFs over time. However, recent tax changes, TCS rules, and a hidden estate tax risk demand careful planning before you start.
This guide walks you through everything — from choosing the right ETFs to creating retirement income decades later.
Building your retirement corpus with U.S. ETFs
Your retirement portfolio needs just three to four core ETFs to efficiently capture global growth. Start with these building blocks available on platforms like Winvesta, INDmoney, Vested, or Interactive Brokers.
VTI (Vanguard Total Stock Market ETF) tracks roughly 3,700 US stocks at a 0.03% expense ratio. It delivered an annualised return of 14.30% over the past decade. This single fund gives you exposure to the entire U.S. equity market in one trade.
VXUS (Vanguard Total International Stock ETF) covers about 8,700 stocks outside the U.S. at just 0.05% annual cost. In 2025, VXUS delivered a remarkable 32.4% return driven by a weak dollar and valuation rotation toward international markets. This outperformance may not sustain, but it proves why global diversification matters for every investor.
BND (Vanguard Total Bond Market ETF) holds over 10,000 U.S. bonds at a 0.03% cost, with a current yield of 3.85%. Bond ETF five-year returns appear weak because the 2022–2023 rate-hiking cycle hammered prices. With rates now declining, BND posted 7.35% in the trailing one-year period.
SCHD (Schwab U.S. Dividend Equity ETF) focuses on 101 high-dividend U.S. stocks at a 0.06% expense ratio, yielding 3.79%. This fund becomes increasingly valuable as you approach retirement and need a steady income from your portfolio.
Vanguard slashed expense ratios across 87 funds in February 2025 — the largest reduction in the firm's history. For Indian millennials, this makes building a retirement corpus with U.S. ETFs cheaper than almost any domestic mutual fund option.
Age-based allocation shifts: The 120-minus-age rule
The traditional "100 minus your age in equities" rule is too conservative for Indian investors. With 6–7% general inflation, no social security equivalent, and potential retirement spans of 25–30 years, you need more equity exposure for longer. The 120-minus-age rule better suits Indian realities.
Age 25–35 (aggressive growth) — 85% equity, 15% bonds. You have decades until retirement, so maximise compounding. Allocate roughly 45% to VTI, 25% to VXUS, 5% to QQQ for tech growth, 15% to BND, and 10% to BNDX. This phase can tolerate significant market drawdowns without lasting damage to your retirement corpus.
Age 35–45 (growth) — 75% equity, 25% bonds. Introduce meaningful fixed-income exposure and consider adding 5% in REITs through VNQ. Shift core equity toward 35% VTI, 20% VXUS, 10% VOO, and 5% SCHD for early dividend income.
Age 45–55 (balanced transition) — 60% equity, 40% bonds. Sequence-of-returns risk starts mattering now. Move equity into dividend-oriented ETFs such as SCHD and VIG for income stability. Begin building a 5% cash-equivalent position through short-term treasury ETFs like SHV.
Age 55–60+ (capital preservation) — 45% equity, 50% bonds, 5% cash. Maintaining 45% equity remains essential because, at Indian inflation rates, a 25-year retirement will rapidly erode purchasing power. Emphasise SCHD for dividends, short-term treasuries for stability, and hold one to two years of living expenses in cash.
The simplest approach uses just three funds—VTI, VXUS, and BND—adjusted for age. Start at 70/20/10 and shift toward 20/10/70 over your career. This aage-basedallocation strategy costs approximately 0.03% annually.
Target date fund alternatives for Indian investors
Target date funds automatically shift from stocks to bonds as retirement approaches. Unfortunately, both U.S. options pose challenges for Indian residents.
Vanguard Target Retirement Funds are structured as mutual funds, not ETFs. Vanguard does not open brokerage accounts for Indian residents, making these funds effectively inaccessible despite their proven methodology and 0.08% cost.
iShares LifePath Target Date ETFs launched in October 2023 and carry Morningstar's Gold Medal rating at just 0.09–0.11% cost. However, most funds hold only $5–50 million in assets. This dangerously low liquidity creates a real risk of fund closure. BlackRock's first attempt at target-date ETFs in 2008 was shuttered in 2014 for exactly this reason.
The practical target-date fund alternative is a DIY portfolio of three to four core ETFs. A millennial targeting retirement around 2055 could start with 54% VTI, 36% VXUS, 7% BND, and 3% BNDX. Then manually increase the bond allocation by one to two percentage points each year. This approach costs less, stays fully liquid, and gives you complete control over your glide path.
Retirement withdrawal strategies that work for Indian retirees
The 4% rule — withdraw 4% of your portfolio in year one, then adjust annually for inflation — remains the foundation of retirement withdrawal strategy planning. Its creator, Bill Bengen, updated the safe rate to 4.7% in his 2025 book based on more diversified portfolios.
For Indian retirees, a lower rate of 3–3.5% is more prudent. India's higher inflation, at 6–7%, erodes purchasing power faster than the 2–3% inflation the original study assumed. Many Indian millennials aspire to early retirement at 50–55, which would require a 35-year withdrawal period.
The bucket strategy splits your portfolio into three time-based segments. Bucket 1 holds two years of expenses in cash equivalents like SHV, funding immediate needs without forced selling during downturns. Bucket 2 covers years three through ten and uses bond ETFs and dividend ETFs, such as SCHD. Bucket 3 holds growth equity in VTI and VXUS, compounding untouched for a decade before refilling the other buckets.
The guardrails approach sets flexible spending rules around your initial withdrawal rate. If your portfolio drops significantly, you reduce spending by 10%. If it grows substantially, you give yourself a 10% raise. This method delivers roughly 30% more lifetime income than a rigid 4% rule while protecting against sequence risk.
For creating retirement income from ETFs, dividends provide a natural base. A ₹5 crore portfolio split across SCHD (3.79% yield), BND (3.85% yield), and VTI (1.1% yield) can generate ₹10–15 lakh annually in dividends alone.
Tax planning for retirement: LTCG, DTAA, TCS, and estate tax
Retirement tax planning is where Indian investors face the greatest complexity when investing in U.S. ETFs. Getting this wrong can cost lakhs over a retirement lifetime.
Capital gains: The July 2024 Union Budget set long-term capital gains on foreign assets (held over 24 months) at a flat 12.5%, with no indexation benefit. Short-term gains are taxed at your income tax slab rate. The ₹1.25 lakh LTCG exemption available on domestic equity does not apply to foreign assets. Currency appreciation during your holding period is fully taxable as part of your capital gain.
Dividends and DTAA: The U.S. withholds 25% on dividends paid to Indian individuals (not 15% — that rate applies only to companies holding 10%+ voting stock). File Form 67 on the Indian income tax portal to claim a Foreign Tax Credit and avoid double taxation. If your Indian slab rate is 30%, you pay only the 5% differential after crediting the 25% U.S. withholding.
For a detailed walkthrough of every tax scenario, read the complete guide to taxation on U.S. stocks for Indian investors.
TCS on remittances: Budget 2025 raised the threshold from ₹7 lakh to ₹10 lakh per year. Investment remittances above this limit attract 20% TCS. This is an advance tax payment, not an additional tax — claim it back when filing your ITR. Budget 2026 keeps the 20% investment rate unchanged but proposes reducing education and medical TCS from 5% to 2%.
The U.S. estate tax trap: The U.S. imposes estate tax on all US-domiciled ETFs held by non-resident aliens at death. The exemption is just $60,000, and rates reach up to 40%. An Indian investor holding $500,000 in VOO or VTI would face approximately $145,600 in estate tax. There is no India-US estate tax treaty for relief.
The primary mitigation is to use Ireland-domiciled UCITS ETFs such as CSPX instead of VOO. These fall outside the U.S. estate tax jurisdiction and benefit from lower 15% dividend withholding at the fund level. For portfolios exceeding $60,000 in US-domiciled ETFs, the estate tax risk makes the UCITS route worth serious consideration.
Healthcare cost considerations in retirement
Healthcare is the single largest variable cost in Indian retirement planning. India's medical inflation runs at 13–14% annually — nearly double general inflation. At 14% compounding, a ₹10 lakh treatment today becomes ₹80 lakh in just 15 years.
Financial planners now estimate a comfortable retirement requires ₹5–10 crore, with healthcare alone potentially needing ₹2 crore over a full retirement. Allocate 15–20% of your total retirement corpus specifically for medical expenses.
Build a three-layer insurance stack while young. Start with a base health insurance plan with a sum insured of ₹10–25 lakh. Add a super top-up plan at ₹50 lakh to ₹1 crore. Then secure a standalone critical illness cover at ₹25–50 lakh for cancer, heart attack, and organ failure payouts. Insurance premiums roughly triple between your 40s and 60s, so locking in early saves significantly.
Sample retirement portfolios by age
The early starter (age 28, targeting ₹10 crore by 60): 45% VTI, 25% VXUS, 5% QQQ, 15% BND, 10% Indian equity mutual funds. Monthly SIP of ₹22,000 growing at 10% annually reaches the target assuming 11–12% blended returns. Starting at 35 instead of 30 nearly doubles the required monthly investment.
The mid-career builder (age 40, targeting ₹8 crore by 58): 30% VTI, 15% VXUS, 15% SCHD, 25% BND, 10% VTIP, 5% cash. Focus shifts toward capital protection and dividend generation while maintaining growth through U.S. equity.
The pre-retiree (age 55, targeting income generation): 15% VTI, 5% VXUS, 20% SCHD, 30% BND, 15% VGIT, 10% SHV, 5% VTIP. This portfolio emphasises steady income through dividends and bond yields wh, while keeping equity exposure to protect long-term purchasing power. Over the past decade, ₹100 invested in the S&P 500 grew to approximately ₹444 in rupee terms, compared to ₹236 in the Sensex. The 3–4% annual rupee depreciation against the dollar effectively adds to US ETF returns for Indian investors, making these portfolios even more powerful for retirement planning.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
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Table of Contents
Most Indian millennials have no employer-provided pension awaiting them at retirement. The burden of building a retirement corpus falls entirely on the individual. U.S. ETFs offer a powerful solution with ultra-low expense ratios, broad market access, and built-in currency diversification against rupee depreciation. A single fund like VOO tracks the S&P 500 at just 0.03% annual cost. That translates to ₹30 per year on every ₹1 lakh invested.
The RBI's Liberalised Remittance Scheme (LRS) allows Indian residents to invest up to $250,000 per financial year in overseas assets. This limit gives millennials ample room to build a meaningful retirement corpus in U.S. ETFs over time. However, recent tax changes, TCS rules, and a hidden estate tax risk demand careful planning before you start.
This guide walks you through everything — from choosing the right ETFs to creating retirement income decades later.
Building your retirement corpus with U.S. ETFs
Your retirement portfolio needs just three to four core ETFs to efficiently capture global growth. Start with these building blocks available on platforms like Winvesta, INDmoney, Vested, or Interactive Brokers.
VTI (Vanguard Total Stock Market ETF) tracks roughly 3,700 US stocks at a 0.03% expense ratio. It delivered an annualised return of 14.30% over the past decade. This single fund gives you exposure to the entire U.S. equity market in one trade.
VXUS (Vanguard Total International Stock ETF) covers about 8,700 stocks outside the U.S. at just 0.05% annual cost. In 2025, VXUS delivered a remarkable 32.4% return driven by a weak dollar and valuation rotation toward international markets. This outperformance may not sustain, but it proves why global diversification matters for every investor.
BND (Vanguard Total Bond Market ETF) holds over 10,000 U.S. bonds at a 0.03% cost, with a current yield of 3.85%. Bond ETF five-year returns appear weak because the 2022–2023 rate-hiking cycle hammered prices. With rates now declining, BND posted 7.35% in the trailing one-year period.
SCHD (Schwab U.S. Dividend Equity ETF) focuses on 101 high-dividend U.S. stocks at a 0.06% expense ratio, yielding 3.79%. This fund becomes increasingly valuable as you approach retirement and need a steady income from your portfolio.
Vanguard slashed expense ratios across 87 funds in February 2025 — the largest reduction in the firm's history. For Indian millennials, this makes building a retirement corpus with U.S. ETFs cheaper than almost any domestic mutual fund option.
Age-based allocation shifts: The 120-minus-age rule
The traditional "100 minus your age in equities" rule is too conservative for Indian investors. With 6–7% general inflation, no social security equivalent, and potential retirement spans of 25–30 years, you need more equity exposure for longer. The 120-minus-age rule better suits Indian realities.
Age 25–35 (aggressive growth) — 85% equity, 15% bonds. You have decades until retirement, so maximise compounding. Allocate roughly 45% to VTI, 25% to VXUS, 5% to QQQ for tech growth, 15% to BND, and 10% to BNDX. This phase can tolerate significant market drawdowns without lasting damage to your retirement corpus.
Age 35–45 (growth) — 75% equity, 25% bonds. Introduce meaningful fixed-income exposure and consider adding 5% in REITs through VNQ. Shift core equity toward 35% VTI, 20% VXUS, 10% VOO, and 5% SCHD for early dividend income.
Age 45–55 (balanced transition) — 60% equity, 40% bonds. Sequence-of-returns risk starts mattering now. Move equity into dividend-oriented ETFs such as SCHD and VIG for income stability. Begin building a 5% cash-equivalent position through short-term treasury ETFs like SHV.
Age 55–60+ (capital preservation) — 45% equity, 50% bonds, 5% cash. Maintaining 45% equity remains essential because, at Indian inflation rates, a 25-year retirement will rapidly erode purchasing power. Emphasise SCHD for dividends, short-term treasuries for stability, and hold one to two years of living expenses in cash.
The simplest approach uses just three funds—VTI, VXUS, and BND—adjusted for age. Start at 70/20/10 and shift toward 20/10/70 over your career. This aage-basedallocation strategy costs approximately 0.03% annually.
Target date fund alternatives for Indian investors
Target date funds automatically shift from stocks to bonds as retirement approaches. Unfortunately, both U.S. options pose challenges for Indian residents.
Vanguard Target Retirement Funds are structured as mutual funds, not ETFs. Vanguard does not open brokerage accounts for Indian residents, making these funds effectively inaccessible despite their proven methodology and 0.08% cost.
iShares LifePath Target Date ETFs launched in October 2023 and carry Morningstar's Gold Medal rating at just 0.09–0.11% cost. However, most funds hold only $5–50 million in assets. This dangerously low liquidity creates a real risk of fund closure. BlackRock's first attempt at target-date ETFs in 2008 was shuttered in 2014 for exactly this reason.
The practical target-date fund alternative is a DIY portfolio of three to four core ETFs. A millennial targeting retirement around 2055 could start with 54% VTI, 36% VXUS, 7% BND, and 3% BNDX. Then manually increase the bond allocation by one to two percentage points each year. This approach costs less, stays fully liquid, and gives you complete control over your glide path.
Retirement withdrawal strategies that work for Indian retirees
The 4% rule — withdraw 4% of your portfolio in year one, then adjust annually for inflation — remains the foundation of retirement withdrawal strategy planning. Its creator, Bill Bengen, updated the safe rate to 4.7% in his 2025 book based on more diversified portfolios.
For Indian retirees, a lower rate of 3–3.5% is more prudent. India's higher inflation, at 6–7%, erodes purchasing power faster than the 2–3% inflation the original study assumed. Many Indian millennials aspire to early retirement at 50–55, which would require a 35-year withdrawal period.
The bucket strategy splits your portfolio into three time-based segments. Bucket 1 holds two years of expenses in cash equivalents like SHV, funding immediate needs without forced selling during downturns. Bucket 2 covers years three through ten and uses bond ETFs and dividend ETFs, such as SCHD. Bucket 3 holds growth equity in VTI and VXUS, compounding untouched for a decade before refilling the other buckets.
The guardrails approach sets flexible spending rules around your initial withdrawal rate. If your portfolio drops significantly, you reduce spending by 10%. If it grows substantially, you give yourself a 10% raise. This method delivers roughly 30% more lifetime income than a rigid 4% rule while protecting against sequence risk.
For creating retirement income from ETFs, dividends provide a natural base. A ₹5 crore portfolio split across SCHD (3.79% yield), BND (3.85% yield), and VTI (1.1% yield) can generate ₹10–15 lakh annually in dividends alone.
Tax planning for retirement: LTCG, DTAA, TCS, and estate tax
Retirement tax planning is where Indian investors face the greatest complexity when investing in U.S. ETFs. Getting this wrong can cost lakhs over a retirement lifetime.
Capital gains: The July 2024 Union Budget set long-term capital gains on foreign assets (held over 24 months) at a flat 12.5%, with no indexation benefit. Short-term gains are taxed at your income tax slab rate. The ₹1.25 lakh LTCG exemption available on domestic equity does not apply to foreign assets. Currency appreciation during your holding period is fully taxable as part of your capital gain.
Dividends and DTAA: The U.S. withholds 25% on dividends paid to Indian individuals (not 15% — that rate applies only to companies holding 10%+ voting stock). File Form 67 on the Indian income tax portal to claim a Foreign Tax Credit and avoid double taxation. If your Indian slab rate is 30%, you pay only the 5% differential after crediting the 25% U.S. withholding.
For a detailed walkthrough of every tax scenario, read the complete guide to taxation on U.S. stocks for Indian investors.
TCS on remittances: Budget 2025 raised the threshold from ₹7 lakh to ₹10 lakh per year. Investment remittances above this limit attract 20% TCS. This is an advance tax payment, not an additional tax — claim it back when filing your ITR. Budget 2026 keeps the 20% investment rate unchanged but proposes reducing education and medical TCS from 5% to 2%.
The U.S. estate tax trap: The U.S. imposes estate tax on all US-domiciled ETFs held by non-resident aliens at death. The exemption is just $60,000, and rates reach up to 40%. An Indian investor holding $500,000 in VOO or VTI would face approximately $145,600 in estate tax. There is no India-US estate tax treaty for relief.
The primary mitigation is to use Ireland-domiciled UCITS ETFs such as CSPX instead of VOO. These fall outside the U.S. estate tax jurisdiction and benefit from lower 15% dividend withholding at the fund level. For portfolios exceeding $60,000 in US-domiciled ETFs, the estate tax risk makes the UCITS route worth serious consideration.
Healthcare cost considerations in retirement
Healthcare is the single largest variable cost in Indian retirement planning. India's medical inflation runs at 13–14% annually — nearly double general inflation. At 14% compounding, a ₹10 lakh treatment today becomes ₹80 lakh in just 15 years.
Financial planners now estimate a comfortable retirement requires ₹5–10 crore, with healthcare alone potentially needing ₹2 crore over a full retirement. Allocate 15–20% of your total retirement corpus specifically for medical expenses.
Build a three-layer insurance stack while young. Start with a base health insurance plan with a sum insured of ₹10–25 lakh. Add a super top-up plan at ₹50 lakh to ₹1 crore. Then secure a standalone critical illness cover at ₹25–50 lakh for cancer, heart attack, and organ failure payouts. Insurance premiums roughly triple between your 40s and 60s, so locking in early saves significantly.
Sample retirement portfolios by age
The early starter (age 28, targeting ₹10 crore by 60): 45% VTI, 25% VXUS, 5% QQQ, 15% BND, 10% Indian equity mutual funds. Monthly SIP of ₹22,000 growing at 10% annually reaches the target assuming 11–12% blended returns. Starting at 35 instead of 30 nearly doubles the required monthly investment.
The mid-career builder (age 40, targeting ₹8 crore by 58): 30% VTI, 15% VXUS, 15% SCHD, 25% BND, 10% VTIP, 5% cash. Focus shifts toward capital protection and dividend generation while maintaining growth through U.S. equity.
The pre-retiree (age 55, targeting income generation): 15% VTI, 5% VXUS, 20% SCHD, 30% BND, 15% VGIT, 10% SHV, 5% VTIP. This portfolio emphasises steady income through dividends and bond yields wh, while keeping equity exposure to protect long-term purchasing power. Over the past decade, ₹100 invested in the S&P 500 grew to approximately ₹444 in rupee terms, compared to ₹236 in the Sensex. The 3–4% annual rupee depreciation against the dollar effectively adds to US ETF returns for Indian investors, making these portfolios even more powerful for retirement planning.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
Ready to earn on every trade?
Invest in 11,000+ US stocks & ETFs
