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Ready for retirement? Learn how to decide on your retirement corpus

Are your current savings enough to sustain you post-retirement? Find out how to determine the total corpus you'll need for a worry-free retirement.

A recent study indicates that India’s total employment generation has increased to 55.3 crore. With such a large workforce, it is crucial for individuals, whether in the government or private sector, to plan for their retirement.

Planning for retirement guarantees that you will have enough money to maintain your standard of living in your later years. However, because of things like rising life expectancy, changing lifestyles, and inflation, this can be difficult.

In this article, let’s go over how to choose your retirement corpus. It will enable you to calculate how much savings and investment you’ll need to make in order to ensure a pleasant retirement. You can create a precise and practical strategy for your future by following these steps.

Step 1: Determine your retirement age

First, let’s understand the retirement corpus meaning. It’s the total amount of money you need to accumulate to maintain your lifestyle after retirement. 

The first step in how to calculate retirement corpus is choosing a realistic retirement age. It sets the timeline for your savings and investments, ensuring you have enough funds for your retirement years.

Consider factors like health, career satisfaction, and financial status. Your health can impact your retirement plans. If you foresee health issues, preparing for early retirement is wise.

Career satisfaction also matters. If you enjoy your work, you might choose to work longer. Conversely, job dissatisfaction might push you towards early retirement.

Financial status is key. Assess your savings, income sources, and financial obligations. For instance, Ramesh, a 40-year-old man with two children aged 10 and 12, needs to factor in their education costs and family expenses when planning his retirement age. Ramesh aims to retire at 60, giving him 20 years to save and invest. This time frame allows him to build a substantial corpus.

If you’re in your early career stage and considering the Financial Independence Retire Early (FIRE) movement, you should also determine your target retirement age. This approach requires aggressive saving and investing to retire much earlier.

Step 2: Estimate your life expectancy

Estimating your life expectancy is paramount for retirement planning. It helps determine how long your retirement corpus needs to last.

For example, Ramesh plans to retire at 60. In India, the average lifespan is approximately 68 years. If Ramesh assumes he will live until 85, he needs to plan for 25 years post-retirement. Extending this to 90 years increases the required corpus significantly.

Assuming a higher life expectancy ensures you don’t run out of funds. It is preferable to overestimate and have extra money.

You can also use the retirement corpus calculator to adjust variables and find the target corpus. Planning for a longer life expectancy secures his financial future.

To know more: Step-by-step guide on retirement planning for baby boomers

Step 3: Calculate your annual expenses post-retirement

Begin by calculating your anticipated retirement expenses. Enumerate every expense you incur on a daily basis, including groceries, utilities, clothes, gifts, and housekeeping. These will probably continue beyond retirement.

Certain expenses including car payments, house loans, and kids’ schooling might be eliminated. Pay attention to regular expenses and make reasonable calculations.

Consider rising medical expenses. These can offset savings from other areas. Your retirement-age expenses should align with your current regular expenditures.

Additionally, be aware that some outgoing expenses might be replaced by new ones, such as transportation assistance and gifting. Estimating these changes is critical for a comprehensive retirement plan.

For instance, Ramesh, if he expects to spend ₹75,000 per month, his annual expense will be ₹9 lakh. This figure helps Ramesh determine the size of his retirement corpus.

Step 4: Adjust for inflation

The next step in how to calculate your retirement corpus is to make sure your retirement fund keeps its purchasing power, you must make inflation adjustments. Over time, inflation devalues money, making it necessary to have more in the future.

For example, Ramesh, who plans to retire at 60, needs to consider inflation when calculating his retirement corpus. If his current monthly expenses are ₹75,000, he must estimate how these expenses will grow over time.

Currently, as of April 2024, the inflation rate based on CPI or consumer price index is 4.83%.

Assuming an average inflation rate of 5%, Ramesh’s monthly expenses will rise dramatically. If he plans to retire in 20 years, his expenses could rise to ₹1.99 lakh per month to maintain the same lifestyle.

Here’s a comparison to illustrate this:

Monthly expenses (₹)Rate of inflation (%)Monthly expenses at retirement (₹)
75,00051.99 lakh
75,00062.40 lakh

The calculation is based on the formula:
Future value=Present value×(1+Inflation rate)n

So, the calculation is:

For 5% inflation rate = 75,000×(1.05)20  ≈ ₹1.99 lakh

For 6% inflation rate = 75,000×(1.06)20  ≈ ₹2.4 lakh

As seen, a higher inflation rate greatly increases the required corpus. Ramesh needs to plan for these future expenses to avoid falling short. Accurately adjusting for inflation helps ensure he accumulates enough funds to sustain his lifestyle throughout retirement. So, use the retirement corpus calculator with inflation for better understanding.

Also read: Tax-efficient withdrawal strategies for retirement in India

Step 5: Determine the total retirement corpus needed at 60

Determining your total retirement corpus at 60 is crucial. One effective method is to consider your post-inflation expenses and expected lifespan.

For example, Ramesh plans to retire at 60. His current monthly expenses are ₹75,000. After accounting for an average inflation rate of 5%, his expenses at retirement will be approximately ₹2 lakh per month. Annually, this amounts to ₹24 lakh.

Ramesh assumes he will live for 25 years post-retirement, planning until age 85. Thus, he will need a total of ₹24 lakh annually for 25 years, which sums up to ₹6 crore.

Additionally, Ramesh should consider a buffer for unexpected expenses. Factoring in an extra 10%, his total retirement corpus should be approximately ₹6.6 crore.

You may also like: Importance of Pension Plans


This is how you calculate your retirement corpus. While many factors are assumed, such as inflation rates and lifespan, things may not always go as planned. For this reason, it’s critical to periodically review and modify your retirement plan. This method provides a good starting point, giving you an idea of how much you need to save and how to invest for the retirement corpus. By regularly revisiting your plan, you can ensure that you stay on track to achieve a financially secure and comfortable retirement.

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