How Much Money Do You Really Need for Retirement in India?
- Retirement planning isn’t about aiming randomly at a big number, it’s about calculating what you need.
- Here’s how to break down your expenses, inflation, life expectancy, and lifestyle needs to arrive at your retirement corpus.
- Includes a relatable example and practical tips.
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Table of Contents
Retirement goals aren’t guesses. Learn how to calculate your exact corpus and plan for every future need, from healthcare to legacy.
Step 1: Estimate Your Post-Retirement Expenses with PERP
Start by identifying your PERP, Percentage of Expenses for Retirement Planning.
If your current monthly expenses are Rs. 75,000, certain costs like children’s education and EMIs will likely go away. Your PERP may drop to around Rs. 50,000/month in today’s terms.
Example - From Rahul (age 35)
Rahul's current expenses are Rs. 75,000/month. His expected PERP is Rs. 50,000/month in today’s value.
Step 2: Adjust for Inflation Over Time
Inflation erodes purchasing power. Using 7% annual inflation, Rahul’s Rs. 50,000/month PERP becomes:
- Rs. 2.7 lakhs/month at age 60 (25 years later)
- Rs. 5.4 lakhs/month by age 70
You must factor in continued inflation even after retirement. Static income won’t be enough.
Step 3: Calculate the Corpus Needed for Monthly Expenses
Assuming Rahul plans to live 20 years post retirement and expects 10% returns on his invested corpus, the amount he’ll need to accumulate is:
Target Corpus for PERP: Rs. 5.1 Crores
This figure is just for covering monthly expenses after adjusting for inflation and expected returns.
Step 4: Plan for Additional Retirement Needs
Medical Fund:
Senior citizen health insurance is costly and may exclude pre-existing conditions. Rahul should plan for:
Rs. 40 lakhs in today’s value = Rs. 2.17 Crores at retirement (for medical emergencies)
Leisure Fund:
Rahul wants to spend ~Rs. 1 lakh/year (in today’s terms) on travel from age 60–70:
Inflation-adjusted leisure goal: Rs. 50 lakhs
Spouse Longevity:
If his wife outlives him by 5 years, and she needs Rs. 25,000/month in today’s value:
Required savings: Rs. 25 lakhs today → grows to Rs. 2.5 Crores in 20 years (at 12% p.a.)
Step 5: Add It All Up
Total retirement needs:
- Rs. 5.1 Cr (PERP needs)
- Rs. 2.17 Cr (healthcare buffer)
- Rs. 50 Lacs (leisure fund)
- Rs. 2.5 Cr (spouse longevity)
Total Corpus Goal: Rs. 8+ Crores
It may sound overwhelming, but time and smart investing are on your side.
Committing 20% of your income to SIPs in equity mutual funds can help you reach this target systematically.
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