Retirement is one of the most important stages of your life for which you work and should save for. With the break-up of the joint family system in India, increase in longevity (life expectancy) due to advanced medical innovations, shorter work-span and lower job security; ‘Retirement Planning’ assumes greater importance.
If you are creating an Investment Plan, your top most priority should be to save and invest for your retirement. Do not think that it’s too early to start planning for retirement. It is very important that you start early for your retirement.
In this post, let us understand – How to calculate the retirement corpus? How to do Retirement Planning? How much do you need to save for your retirement goal? How to calculate the required retirement fund in 3 simple steps using MS Excel?
First, let’s understand the stages of Retirement planning.
Let’s now calculate the retirement corpus and the required amount of savings to achieve your retirement goal. You can do this in 3 simple steps as below. I have also provided a “Basic Retirement Planning Calculator.” Do try that.
Example : Mr Rahul G (35 years) wants to plan for his retirement. His current annual living expenses are around Rs 3.6 Lakh. He wants to retire at 60 years and expects his life expectancy to be 80 years. He would like to know the projected / required retirement corpus and what is the required savings to meet his retirement goal amount??
So, Rahul has 25 working years (65-35 years) and would like to enjoy 20 years (80-60 years) of retirement life.
Step 1 – Project your Expenses
We are all aware that the living expenses may not remain the same. They keep increasing. So, we need to first project the expenses by assuming a certain rate of Inflation (let’s assume it as 7%).
The current expenses of Rs 3.6 Lakh p.a. will be projected to be at Rs 19.53 Lakhs, in the first year of Rahul’s retirement (at 60 years of age). He needs Rs 19.63 Lakh to continue with the same spending pattern in the first year of his retirement.
However, he assumes that some of the current expenses may not be relevant when he retires. So, he assumes the projected expenses to be Rs 14.65 Lakh only (75% of 19.63 Lakh).
Rahul expects to earn 8% from his investments after the retirement. So, we now need to calculate the required retirement corpus. At 8% ROI and 7% inflation rate, the real rate of return (inflation adjusted) is 0.9346% (Real rate of return is generally used in ‘withdrawal phase’ of the investments).
To withdraw inflation adjusted expenses of Rs 14.65 Lakh for 20 years (retirement life) at 0.9346% real rate of return, the required Retirement Fund is Rs 2.66 crore.
In this step, let us calculate the required savings amount to achieve the retirement goal amount (Rs 2.66 cr).
Rahul wants to invest in safe fixed income securities only, and expects 9% rate of interest from his investments. To accumulate Rs 2.66 cr in 25 years (work-span), at 9% ROI, Rahul has to save and invest Rs 3.14 Lakh per year (or) Rs 23,743 per month.
You may try these calculations using the below Retirement corpus calculator.
Download Simple & Basic Retirement Goal Planning Calculator.
We often hear about the celebrities and famous personalities struggling to make ends meet during their retirement. Kindly go through the below links to understand the importance of having a realistic and good Retirement Plan;
So, to become wealthy and to stay wealthy, it is very important to MANAGE your money properly.
You can get a HOME LOAN to buy a property. You can get a PERSONAL LOAN to meet your short-term financial goals. You can get an EDUCATION LOAN to fund your higher education (or) to fund your Kid’s higher Education. But, you don’t get a loan to fund your RETIREMENT (hmmm..by any chance, are you now thinking about Reverse Mortgage?).
Make your retirement years more comfortable and secure. Plan your retirement now! Remember, retirement planning is not a one-time event, but a continuous process of making sure you are staying in line with the goal you set for yourself. Do share your views and comments. Cheers!
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(Image courtesy of mapichai at FreeDigitalPhotos.net)
This post was last modified on July 10, 2023 6:33 pm
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Hi Sreekanth,
I have been working aboard for quite a while and 45 yrs old now. The only assets I have is my own house due which I have some credits to clear.
I have a son who just entered his college and daughter who is in 9th.
To be frank there is no much savings as such. Planning to pick up some land to do organic farming for retirement.
Could you help me out as to what wise investment plans should I do to have a safe comfortable retirement with no financial crisis. As its already too late in saving for myself and secure families future. Where do I stand.
Which is the insurance policy you would suggest I invest in
Mutual funds in each of my kids name like the demat account would it help.
Does investing in gold helps
Chit funds
Dear Patrick,
You are in a tricky situation!
If you have not accumulated savings for important goals then either you have to invest more to accumulate goal corpuses in safe investment avenues or you may have to consider investing in risky investment avenues to achieve your goal target amounts. So, you may not have to decide which one you would like to opt for??
If you do not have adequate life insurance cover, suggest you to buy a Term plan cover at the earliest. Get yourself adequately covered with Personal insurance cover. Do buy a health plan which covers all your family members.
Suggest you to read this article and may revert to me :
List of articles on the Key components of Personal Financial Planning.
Dear Shree,
By chance I had visited your blog. Excellent and thoughtful advises. I wish I had to take your suggestions and opinions earlier. Better late than never.
I am a single parent aged 45yrs with 2 boys ( 16 yrs and 10yrs)
Below is my brief portfolio
Real estate - 3 cr
term insurance - 2 cr
health insurance - 10 lakhs family floater
5 lakhs by company
10 lakhs ( cancer care policy due to my family history)
various traditional policies from lic - 10 lakhs ( premium ending by next year and benefits after 3 yrs)
equities - 4lakhs
mutual fund ( through a financial advisor) - 25 lakhs
ppf - 5 lakhs
fixed deposit - 2 lakhs
sip in force for 20000/- per month
by annual income is 15lakhs
passive income is 3 lakhs ( through rent)
annual expenses are appx - 8 lakhs ( including premiums )
The current situation at my work place is not very promising.
if i'm planning to retire by 50 yrs ( in 5 yrs time) what are the necessary steps I have to take . Am I in the right direction of financial planning.
if there are any steps to be taken please guide.
Dear Shree,
sorry to get back to you so late as it took some time to track back my post.
Thanks very much for your suggestions and advise.
1.i tried to check with personal accident insurance, but I guess no one is interested to sell this as it doesn't fetch
anything to the company. i'm still working on it, what would be your advise.
2.yes I have a 10lakh loan ongoing , another 15 lakh which is almost ending.
3.for my elder son's eductation I have to redeem the mutual fund.
4,my ppf account is 15 yrs old extended for another 3 yrs
5.for my younger son's education again I will use the remptions and their policies.
6.i'm almost done with the will , but since my kids are minors thinking of the right executors.
thanks again !!
Dear sheela Ji,
1 - You may kindly try to buy from the insurance company directly.
Dear Shree,
could you please advise me on the above.
also I would like to know the following with regard to a will
1.can a person write any number of will?
2.should he/she declare all the assests ?
3.what happens if the executors are out of country , how does it work?
4.witnesses need to know all the asset details?
5. who should know that there is a will?
6.who should have the copy of the will?
thanks to enlighten me..
Good day ahead.
regards
sheela
Dear sheela,
1 - Yes. (but the latest WILL is considered at the time of execution).
2 - Optional (but advisable).
3 - That should be ok I guess as long as they are ready to execute the WILL. So, the testator has to plan for this accordingly.
4 - Generally the WILL has to be signed before witnesses, so they may know the WILL details.
5 - The beneficiaries, executor & witnesses.
6 - may be executor.
Read:
How to write WILL online..
Importance of WILL.
Dear sheela,
1 - You can consider buying a Personal Accident Cover with permanent & temporary disability benefits. Read: Best Personal Accident Insurance plans.
2 - Do you have any loans which are outstanding?
3 - Your elder son will go for higher education in next 1 to 2 years, have you planned for his educational expenses? Have you ear-marked any investments for this? (High priority short term goal). You may use LIC maturity benefits for this purpose.
4 - How old is your PPF a/c?
5 - Kindly use the calculator available in the above article to arrive at approximate retirment corpus (based on early retirement) & approx required savings amount.
6 - Kindly read this article : Kid's education goal calculator
. Use the calculator available in this article to estimate the approx amount required for younger son's education goal.
7 - Kindly write a WILL. It is an important action item..
Read:
How to write a WILL?
Write your WILL online.
Leaving A Mark Before That Final Journey: The Last Will & Testament
You may revert to me with more queries..
dear Sir,
i am retirng in 6 months. retirement corpus exptected is Rs 1 Cr. i wish to get monthly return of Rs 40000. i hv no liabillities., own house. no medical expense. consider no other investment. kindly guide for mutual fund investments
Dear Satish,
Assumptions : Investment of Rs 1cr for next 20 years at the rate of 9% & at inflation rate of 8% can provide you around Rs 45k per month income.
If you can afford to take a little bit of risk, you can consider combination of below investment options,
* Senior Citizen Savings Scheme.
* Post office Monthly Income Plan (Maximum investment Rs 4.5 Lakh in single a/c).
* Mutual Fund MIP - Dividend Option.
* A small portion of your fund corpus in MF MIP - Growth option + Balanced fund - Growth option for say next 5 years.
Read:
Best MF MIP Plans.
Best Balanced funds.
List of Best Investment options.
dear sir,
i am 40 years of age. presently working in Malaysia. i adequate amount of medical and gnrl insurance and also child education funds. having wife( house keeping) and one child of 4 years old. but my employer is providing any pf and pension. age retirement is 60. so want to saving the of 19 years of my service and i want a monthly or qtly income after mty retirement. iam having house ( free from loan ) which around 7000 permonth rentally income. after 60 1 want to seettle in india.
so suggest me suitable plan FOR monthly income after retirement. at present i can save 10000 per month .
thanks in advance
Dear rajkiran,
Do you have adequate life insurance cover?
Suggest you to use the calculator to estimate the required amount savings to accumulate your required retirement corpus (if not used it).
You may consider investing in Equity oriented Funds for next say 10 to 15 years.
Kindly read:
Best Equity Mutual Funds 2016.
List of Best Investment Options.
Kid's Education goal calculator.
sir, i having enough insurance coverage
thank you reply i having enough insurance coverage.as suggested by invest equity oriented scheme like hdfc balanced und icici baned fund and tata balaced fund for 15years. . after 15 years how do invest for monthly income plan ? plase advice .
thank you advanceraukiran
Dear rajkiran,
You can start investing in Equity funds to accumulate wealth and you can redeem these funds and invest in appropriate investment avenues (suitable to you at the time of retirement) to get monthly / periodic income.
THANK YOU VERY MUCH FOR YOUR VALUABLE SUGGESTION
I want to invest 3000/mnth for 18yrs/now I am 32 yrs old..I would like to buy a investment plan/pension plan..
Suggest me...a plan or which shares or mutual funds to buy... ??
Dear Unnikrishnan,
Do you have sufficient life & health insurance coverage?
Suggest you to invest in 2 to 3 good equity mutual funds instead of a pension plan.
Kindly read below articles:
Financial planning pyramid..
Best Equity mutual funds
Best investment options list.
Hi, I am 39 years and very poor in financial planning. I have 3 lic policies which will yield 5 - 7 lakhs on maturity. 3 mutual funds, very minimal returns, no health policies, no term policies, only saving grace is PF which has accumulated to aaround 13 lakhs. Have a 50 lakhs home loan taken 2 years back and probably 5 lakhs in bank. As mentioned am very poor in financial planning and need to do something from this year so that the future is secured for my family. Any guidance where I need to start?
Dear Bidds,
Kindly read this article : Financial planing pyramid and revert to me.
Please let me know if any of the following which I am looking to invest in are good for retirement goal.
Birla Sun Life Frontline Equity Fund (G)
Birla Sun Life MNC Fund (G)
Franklin India Bluechip Fund (G)
Franklin India Prima Plus Fund (G)
HDFC Equity Fund (G)
ICICI Prudential Value Discovery Fund (G)
Mirae Asset India Opportunities Fund - Regular Plan (G)
UTI Opportunities Fund (G)
Thank you,
Anand. E
Dear Srikanth,
I do have Emergency fund, Term Insurance Cover , Personal Accident Cover etc., and my wife is taking care of our Child's education goals. The above options are solely for Retirement investments which I am planning to in 15-20 years from now basing on how much I accumulate. Will invest with 10% increase in value of investment.
Thank you,
Anand. E
Dear Anand,
Considering your profile & investment objectives, suggest you to invest aggressively in Diversified fund + Small&mid-cap funds for next 7 to 10 years.
Invest as much as possible and as frequently as possible.
Franklin Primaplus/ICICI Valuediscovery. Mirae opp / Franklin Smaller cos fund.
Read : Best equity mutual funds 2016.
Thanks
you Mr. Sreekanth
Hello Sree,
I am always being inspired by your articles and response. This is a long term investment.
My portfolio is as follows..please review and provide your inputs.
SBI Magnum MidCap Fund – Gr – 2000 rs
Mirae Asset Emerging Bluechip Fund – Gr – rs. 2000
Birla Sun Life Frontline Equity Fund – Gr – rs.2000
Birla Sun Life Monthly Income Plan II – Wealth 25 – Gr – rs.2000
Tata Balanced Fund – Regular Plan – Gr – rs 2000
ICICI Prudential Value Discovery Fund Gr – rs.1000
UTI MNC Fund – Gr – rs500
Axis MidCap Fund – Gr- rs5500
Axis Long Term Equity Fund – Gr – rs.1000
Kotak Emerging Equity Scheme – Gr -rs.4000
Motilal Oswal Most Focused Midcap 30 Fund – Gr – rs.2000
Motilal Oswal MOSt Focused Multicap 35 Fund – Gr – rs.3000
Reliance Pharma Fund – Gr – rs.3000
Reliance Small Cap Fund – Gr- rs3000
Sundaram Select MidCap – Gr – rs5000
Canara Robeco Emerging Equities – Growth – rs1000
HDFC Mid Cap Opportunities Fund Growth – rs1000
UTI-Transportation and Logistics Fund- Growth – rs500
UTI-Transportation and Logistics Fund- Growth – rs500
DSP BlackRock Micro Cap Fund – Gr – rs1000
rgds,
rakesh
Dear rakesh,
Kindly find my reply at 'best mutual funds to invest in 2016.' (as you have posted same query there..)
I would like to invest lumpsum in Mutual Funds and Stocks. I am not going for SIP since i am currently jobless. I already have Emergency Funds & Debt Funds such as SB, FD, PPF, NPS.
Goal : Retirement Corpus
Investment Horizon : 20 yrs (I am 41 yrs old)
Investment Value : 10 lacs
Expect returns / maturity value : Rs.1 Cr.
I already have invested in the following Mutual Funds with Equity Option :
ELSS Fund : Axis Long Term Equity Fund and Franklin (I) Tax Shield
Sector Fund : IPru Exports & Other Services Fund, IPru Indo Asia Equity Fund, Reliance Gold Savings Fund, Reliance Pharma Fund
Small Cap : DSP Blackrock Micro Cap Fund, Franklin India Smaller Companies Fund
MidCap / Balanced : HDFC Mid-Cap Opportunities Fund, HDFC Balanced Fund
Large Cap : IPru Focused Bluechip Equity Fund, HDFC Equity Fund, DSP BR Opportunities
Diversified / FlexiCap : HDFC Flexicap Fund, ICICI Prudential Value Discovery Fund
Keeping all MFs for long time horizon (for retirement), I have invested in 2/3 funds for each category to get better returns and buffer losses(even if 1 fund doesnt perform well in a particular year, the other might).
1. Which funds can i invest the lumpsum amount, heavily, to get the desired retirement corpus ? Any of the funds above (or) any new fund like Index Fund / ETF ?
2. Which stocks would you recommend buying - i am looking for Regularly yielding high dividend stocks for last few years. The Dividends arising from the stock - after my expenses, i will invest the surplus in MF.
3. The funds that i have already invested -- am i on the right track? If i have to prune down, what are the stocks i can close, in say, one/two year's time ?
Hi Sreekanth,
I earn 33k, and i am 27,
How much should i save from now on and in what should i invest?
thanks
Dear Ravi..Let me know your financial goals. Are you married? Do you have dependents?