Planning your retirement starts with one big question : “How much money will I need when I stop working?”

The amount you need is called your retirement corpus. Calculating it is easier than it appears if you follow a step-by-step approach.

Step1. Estimate your monthly expenses after retirement. 

Start by identifying how much you will spend per month after you retire. This should include:

●Food

●House maintenance

●Utilities (electricity, phone, gas, internet)

●Transport

●Health insurance & medical expenses

●Occasional entertainment

●Small travel expenses

Many people assume their expenses will reduce after retirement, but medical and lifestyle needs may keep them nearly the same.

Example ( Age 40 planning to retire at 60).

Your current monthly expenses = ₹50,000. Assume expenses reduce by 10% after retirement, so expected monthly expense = ₹45,000 per month.

Step 2: Adjust this expense for inflation.

Prices go up every year. So, your ₹45,000 will not be the same 20 years later. Assume a reasonable inflation rate of 6% per year.

Use the future value formula:

Future Expense =

Present Expenses ×( 1+ inflation rate)^(yrs of retirement)

So, after 20 years :

Future monthly expense = 45,000×(1.06)^20

= ₹1,44,300 per month

This means, you will need ₹1.44 lakh per month in today’s terms when you retire.

Step 3: Estimate how long you need the money 

This means estimating your life expectancy. Financial planners usually assume life expectancy up to 85-90 years

If you retire at 60 and live till 85, you need money for 25 years.

Annual expense after retirement =

₹1.44 lakh×12 =₹17.28 lakh per year.

Step 4: Assume the return on your investments after retirement.

☆Senior citizen savings schemes

☆Fixed Deposit

☆Post Office Schemes

☆Debt mutual funds

☆Immediate Pension Schemes/Annuities

☆SWP from balance funds

Safe return = around 6-7% per year. We will assume 7% return.

Step 5: Calculate the retirement corpus 

Simple arithmetic that we have learnt this in the 8th standard.

To earn ₹7, you need to invest ₹100.

To earn ₹17.28 L, you need to invest 100/7×17,28,000 = ₹2,46,85,714 i.e. ₹2.47 crore.

Step 6: Final answer 

You will need around ₹2.47 crore as retirement corpus.

This amount will allow you to withdraw ₹1.44 lakh per month at retirement age, adjusted for inflation.

Step 7: Now, calculate how much you must save monthly today.

You want ₹2.47 crore in 20 years.

Assume you invest in equity mutual funds (or, a mix of equity, balanced fund and gold) giving approx 12% annual return.

Google SIP Calculator. Select expected rate of return, duration. The total value of your investment after 20 years with a ₹25,000 p.m. SIP, will be ₹2,49,78,698.

So, let’s put all the above information like this

Current expense:₹50,000

Post retirement expense: ₹45,000

After 20 yrs, inflation makes it: ₹1.44 lakh p.m.

Annual expense needed after retirement: ₹17.28 lakh

Retirement duration: 25 years

Return during retirement: 7%

Required retirement corpus: ₹2.47 crore

SIP needed for next 20 years at 12% return: ₹25,000 per month

Further, we need to make decisions on the investment mix during this period of regular investment. Till the age 50, you should have maximum allocation in equity but as you reach your destination i.e , age 60, gradually you should reduce equity exposure.

Now, here, I’ve a very strong point to share. From the age of 60 till 85 or even more, your monthly expenses will keep growing. The ₹1.44 lakh p.m. will grow as inflation grows. To bridge this gap, you need to plan in advance right from your age of 40. Just increase your SIP amount by only 10% ,every 5 years. It means your ₹25,000 SIP at age 40 should increase to ₹27,500 after 5 years when you reach 45. This will create a huge difference and you will be able to beat the inflation and even create a stronger financial position.

I suggest you should try out different numbers on your SIP Calculator and find out for yourself the various options as per your target and assumptions.

Besides, in our example, we have started from age 40. Starting at 40 is a bit late, but still manageable. If you had started 5 years early, the total value would have been ₹4.74 crore instead of ₹2.47. And, in case you could start from the age of 30, the value would have been a staggering ₹8.82 crore. However, at your early age , salary or income, too, was less.

So, let me give you another option.

If you start at age 30 and continue your SIP for 30 years with a target to build a retirement corpus of ₹2.82 crore, your monthly investment i.e., your SIP comes to just ₹8000. So, ₹8000 SIP for 30 years @12% return would give you ₹2.72 crore.

And, if you get 14% return, the value would go up from ₹2.82 to ₹4.45 crore. Alternatively, your SIP of just ₹5000 @14% in 30 years will get you ₹2.78 crore. Trust me, if you try various combinations, you will be surprised with the numbers.

Here’s an interesting insight worth remembering: whether you’re in your 20s, 30s or even 40s, building your first ₹10 lakh corpus is always the hardest. This is the stage where people get distracted by lifestyle upgrades, risky get-reach-quick ideas, or breaking investments for non-essential purchases. But once you reach this milestone and allow that money to stay invested in a growth-oriented fund, the snowball effect begins.

At around 12% yearly returns, money doubles roughly every 6 years. In 18 years , your money becomes ₹80 lacs. So, if your first ₹10 lakh can grow within 20 years to ₹1 crore on its own, then imagine how much more wealth you can build when you keep investing regularly alongside it.

The goal isn’t to stop at ₹1 crore, but to let the compounding journey continues so your retirement corpus stays ahead of rising costs.

So, please do remember:

■Start early.

■Increase the SIP by 10% each year as your income increases.

Along with building a corpus, plan for health insurance, as medical expenses rise sharply after 60. Keep an emergency fund for unexpected needs, and reduce risk as you near retirement. Besides, consider part-time work or hobbies that can keep you busy and can generate small income.

Retirement is not an age to prepare for ; it’s a goal built slowly through consistency and smart planning. Start early. Stay Invested and retire powerful.

Note: Good news – My book “3 Ms of Business”  is now available on Kindle at just ₹99. If you enjoy my blogs, you might find the book helpful.

(Link in the Book section)

 

Disclaimer: The information provided in the blog is for educational and informational purposes only and should not be construed as financial advice. Readers are encouraged to consult a qualified financial advisor before making any financial decisions. All views expressed are personal.