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!
Continue reading :
(Image courtesy of mapichai at FreeDigitalPhotos.net)
This post was last modified on July 10, 2023 6:33 pm
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Hi Sir,
I am 35 and just marriad and working in private sector.
1) I have Medical insurence from New India for both of us with Rs 5 L. Later I will take super top up.
2) No term insurence.
I want to invest cominng yrs into MF.
A) 10 yrs plan
B ) 15 yrs plan (may be for child education)
C) 15 yrs plan for retirements.
I read your related links for retirements and child education.
I am able to invest 15 thousand PM.
My plans are
Retirements (10+)
----------------
1) UTI midcap fund -5000
2) Tata balance fund Plan A (Balance) -3000
should I invest in both or choose one for Rs 8000/~
Child education (10+)
-------------------
2) Franklin India Prima Plus Fund (Diversified/Multicap/Large & Mid) - 3000
Mid term ( 10 yrs) - 5000
----------------------
HDFC’ s Prudence fund
or
HDFC’s Children Gift Fund (Inv plan)
Please help whether it ok or not for my current capacity.
Thank you,
bubai
Dear bubai,
Do not postpone buying a Term plan. Also, go through this article - Best Personal Accidental plans.
Shortlisted funds are good ones.
For 'Child education' goal, you may add one Mid-cap fund, invest in it for next 8 years or so.
Hi,
Thank you for your reply.
should I invest in 2 Mid cap as mentioned below or invest in one Midcap as 8000?
1) UTI midcap fund -5000
2) Tata balance fund Plan A (Balance) -3000
Thank you,
/bubai
Dear bubai,
You can invest in both the funds.
Hi Shreekanth,
I like your articles. I am 32 yrs old s/w professional and looking forward to retire when I turn 58 with the retirement kitty of 2.2. cr .
Recently I came across NSC (version IX, 10 yrs locking) illustration where one need to invest 1 lac/annum for 10 yrs and then keep on reinvesting matured amount till the retirement and you are done. But when I found that interest is taxable, returns looks unattractive. Is there any point in going ahead with NSC?
Bought HDFC life regular pension plus policy last month with 6000/month for 24 yrs which gives me 14 lacs sum assured. Every year it will add some reversionary bonus and terminal bonus on last year of the policy. Data shows rev bonus is declared last year is 2.5% of SA and terminal bonus 10% of SA. Now I am bit skeptical about this policy after paying just 2 installments. Is it worth going ahead with this policy ?
How much should one expose in PPF ? I've started investing in PPF since last 3 yrs and have 3 lacs there by now. At max I can hold PPF account 17 more yrs. What should be done after that as I have 9 more yrs to retire after PPF maturity.
I come in 30% tax bracket and my 80C bucket of 1.5 lacs is already full with PF, home loan principal, PPF, term insurance etc. Currently I invest in SIP around 32000 per month with 50% mid/small cap and 50% large cap.
Thanks
Kshitij
Dear Kshitij,
For long-term wealth accumulation, Fixed income (FD/RD/NSC etc) should be avoided.
Suggest you to discontinue the HDFC Policy. Do not compound your mistake by continuing with it.
Kindly read my article on - How to get rid off bad insurance?.
PPF can be part of your Debt portfolio towards your Retirement goal.
Do you have health insurance cover?
Thanks Sreekanth for the quick reply and for the advice.
I do investments in stock market and MF since last 7-8 years. Through SIP in MF since last 3- 4 yrs I built around 9.4 lacs so far from the actual investment of 7 lacs, which is not really of 12-15% annual return of usual MF claims I hear though I invested in mixture of all funds right from balanced/small-mid cap/large cap. After experiencing many gains and losses in stock market, now I am more keen in investing in small/mid caps for long term. Is it risky?
How should be my portfolio for building retirement corpus. How much need to be invested monthly ? I have 2.5 yrs old daughter. How should be the split in MF, PPF and sukanya samruddhi ?
Thanks
Kshitij
Dear Kshitij,
Kindly list out the mutual fund scheme names.
For long-term wealth accumulation - Small/Midcap or Equity diversified (multicap) can be the best bets.
Kindly go through the below articles;
kindly use the calculator in the article and calculate the approx amount of savings per month.
Also, read this article - Kid's education goal.
Do you have health insurance cover?
Hi Sreekanth,
Below are my MF SIPs.
SBI bluechip fund Dividend 7000
Birla MNC Fund - Growth 8000
CANARA ROBECO EMERGING EQUITIES - GROWTH 8000
Franklin India High Growth Companies Fund - Dividend 8000
Is Sukanya Samruddhi worth of being part of the investments ?
Yes, I have Company family floater health cover of 2.5 lacs, and also got a super topup upto 10 lacs for this year. I also have also got term insurance from Max India of (70 lacs + 28000 for 120 months) as a death benefit.
Thanks
Kshitij
Dear Kshitij,
For long-term horizon, suggest you to opt for 'Growth' option instead of 'Dividend' option.
Kindly read my review on Sukanya Scheme.
Pls let me know if
1- TDS will be deducted from returns at time of redeem MF
Dear Manoj,
TDS is not applicable on MF redemption. You need to file capital gains/losses (if any) in your Income Tax Returns.
Dear Sreekanth Reddy,
Thanks for your reply.
If I am not tax payer nor filing income return. in that case what is income tax implications.
Pls advice.
Dear Manoj, if you are not a tax assessee, then what exactly do you want to know regarding tax implications?
Dear Sreekanth,
I am interested to invest in below two MF for 5 yrs term
1- Tata Balanced Fund-Rs 5K p.m
2- HDFC Prudence Fund or Franklin India High Growth Fund- Rs 5K p.m
Pls advice how much I will get after 5 yrs from each funds.
Dear Manoj,
The selected funds are good ones. It is not possible to say the maturity amount.
But you can expect decent returns over and above the bank fixed deposit rates. Kindly remain invested for long-term.
Hi Sreekanth,
I am following your blog regularly. I need clarifications whether to stay with this LIC plan or with draw from this plan.
I have a LIC Plan 148 Retire& Enjoy Plan. I have copied the below from the plan.
"Under this insurance proposal you will need to make premium payments of Rs.186033/- p.a. from your own
funds till your age of 54 years. This proposal provides for a high riskcover of Rs.5674920/- starting at age 33
and growing to Rs.11853090/- at age 55
In the year 2035 when you will be 55 years of age, you will start receiving annual tax free income every year till
75 years of your age. Income starts at Rs. 837751 per annum and increases by approximately 0.00 % every
year to take care of inflating costs of living. There is a provision of risk cover during this period too. In case of
death during this period lump sum amount corresponding to the prevailing risk cover will be paid to your nominee. "
I have paid EMIs (16,123/-) for 10 months, and due to some financial crunches i was not able to pay the EMIs.
My financial condition is better now and I am in a position to pay the EMIs.
I need your views on whether to continue with this Plan or invest the same in the SIPs.
I have a term insurance of 55L, Since I have taken this LIC policy i did not take other Term Plan.
Kind Regards
Prasanna
Dear Prasanna,
Just ignore this plan and switch to mutual funds.
Is it 0.00% rate of increase of income?
The present value of Rs 8,37,751 pa is equal to Rs 1,79,737 pa in today's value @ 8% rate of inflation. Kindly analyze if this is sufficient for you?
Thanks Sreekanth for the reply.
I need few more clarifications.
I am 35yrs now and would like to retire at 60 (as usual as others, noting new :-) ) . I would like to invest on low risk MFs. Please suggest which one is better for low risk . Mid cap / small cap / Large cap MFs.
I need money for retirement/kids education/marriage.
I am planning for long term (15 ~20 ) years.
Kind Regards
Prasanna
Dear Prasanna,
Why do you want to invest in low risk Mutual funds only?
Hi Sreekanth,
Article is really simple and powerful. Thanks for great information.
My age is 32 and same as every people would like to retire at 60 and lead a normal life. I'm working in abroad now and Till this month i've been paying my fathers debt, hope it will be completed this year.
Until i read your post i'd interest to start investing for retirement life but no clear picture as you've shown in phases.
Also without any idea at the age 29, started the life insurances and paid premium on LIC & BSLI Vision as mentioned below.
In LIC, (Jeevan anand 149) for 25 years half yearly mode (20, 939) for the sum 10,00,000.00.
In BSLI Vision for 21 years half yearly mode (20, 932) for the sum assured 400,000.00.
Just started to invest in stocks on my own knowledge & experience. Holding demat account in ICICI direct.
I'm planning to start saving or invest in mutual fund through SIP and would like to have your great advice on the same.
As far now expenses approximately including insurance (42, 000.00) will be 1 Lac.
Basic queries only, which MF to select and how much amount per month & also for how many years need to be invested. Is it good to invest through ICICIdirect as i'm not sure whethere there is any difference if i'm going to change the broker.
Should i've to reallocate those investment later. Also there are more options to invest or save (Stocks, bonds, FD) and Please suggest me also to invest on any of these options (how much amount and no of years).
I would be very happy to know from you and eagerly looking forward for your reply.
Dear Balamurugan,
I will surely guide you. Lets start with Life insurance.
Do you have only these two Life insurance policies? Both these plans are traditional ones (moneyback/endowment/wholelife). These kind of plans may utmost give your
5% returns. Kindly read my article : How to get rid off unwanted life insurance policies?. Suggest you to take Term insurance plan and then discontinue these kind of plans. Read my article : Top 7 best online term insurance plans. Are you an NRI?
Investing through ICICIDirect is safe and secure, but the brokerage charges are a bit on higher side. I too invest through them only.
Dear Sreekanth,
Thanks for your kind reply!
Yes i've only two insurance which i'd mentioned. I read your said article on getting rid of unwanted insurance policies and also term insurance plans, which i should have read few years ago, but its not too late now. Thanks for providing awareness on the same.
When i read the documents required for online term insurance plans, You've mentioned that need to provide income tax returns of 3 years etc., but as i've not filed income tax in India since June 2011 as i left to work in abroad and on this scenario how to provide income proof.
-------------------------------------------------------------------------------------------
FAQ 8 – What are the required documents to purchase an online term insurance plan?
Generally you will be asked to submit; Identity proof, Address proof, Age proof and Income proof (Income Tax returns of 3 years / Form16s / Profit & Loss statements). You have to undergo medical tests too.
----------------------------------------------------------------------------------------------------
As i'm planning to come to India in 1 or 2 months, is it okay to take term insurance from India when i'm there or apply online from abroad now. Please advise me on the same.
Yes I'm NRI, i've been working here for 1 year and will be working for another 6 months more.
Would like to know more and i wish not to make you tired reading my post alone. So stopping it here for today with these queries. Thanks.
Dear Balamurugan,
If you are employed outside of India, you may submit your income proofs, Life insurance company may also ask for bank statements.
You may take term pan when you are in India. But disclose that you are currently employed in foreign country in the proposal form.
Dear Sreekanth,
Thanks for the reply. Hope you're well!
Could you please share me your mail id for further to communicate . Thanks.
Dear Sreekanth,
Just to let you know that after i subcribe i got your email id. I'll contact you on mail. Thanks.
Sure dear Balamurugan..
Hi
Shreekanth,
Somebody is asking me to invest 18 lakhs in MF's for 5 yrs, Now he wants me to take this amount from bank at 10.15 % interest for 20 yrs, but he says that I can earn well after the interest component payment after 5 yrs. Is doing this module of taking loan of 18 lakhs and investing in MF advisable , kindly guide , need your advice ASAP.
Dear Samrat,
Kindly don't do this. May I know who is this 'somebody'??
Hi shrikant ,
thanks for the reply , the somebody is a vp in icici bank prudential system, he told me to take loan of 18 lakhs, and invest it in 5 yrs term in sip's , and told me that I can earn good amount in 5 yrs. But meanwhile by god's grace I got to know about your site , and asked you . So I guess It wont be suggestible to take loan and invest ?
Dear Samrat,
If you invest in MF SIPs for long term, you can accumulate wealth. But, not by taking loan and investing in mutual funds, that would be too risky.
Suggest you to start with monthly MF SIPs without taking any loan. It can be as little as Rs 1k.
Hi Shree,
Thanks for your reply , You are more prompt in answering questions than I am to ask . Actually I didn't knew how to find your answers, then I searched for retirement planning and got to know the way to reach you on your site .. I know now. I was actually a short term player always , but after reading your many articles I now agree on long term planning for accumulation of wealth.
I have been doing SIPs from 2013, but always broke them after every 12 months , getting a little profit on the invested amount, never thought of carrying it forward. now again I have started SIP s in 2015 on a monthly basis of 16k rs with four funds of 4000 each. They are as follows :-
ICICI Prudential Top 100 Fund - Regular Plan - Growth
ICICI Prudential Focused Bluechip Equity Fund - Regular Plan - Growth
ICICI Prudential Value Discovery Fund - Regular Plan - Growth
ICICI Prudential Exports and Other Services - Regular Plan - Growth
Now the question ... are these funds good to continue ?
or plz suggest some good money earning funds ..
I had done it thru an ICICI bank friend who suggested me these , I don't have any knowledge on investing , I just asked him where should I invest 16 k every month and he suggested this.
Am I doing this right ?
My goal is to make a corpus of 2 cr in a period of 10 yrs starting from 2015 to 2025. Is it possible ? and how do I do it ? I can increase the 16k figure to 25 k from coming jan.
Plz Advice on the above ....
Rgds
Samrat Hore
Dear samrat,
Start investing as much as possible for long-term wealth accumulation. Increase the SIPs amount whenever you can do so.
I believe it is better to diversify across fund houses instead of investing with only one fund house (ICICI), though the selected funds are good (except 'Exports' fund)
Regarding corpus calculation, read this article : Calculate Future value of your investments.
Dear Shree ,
Thanks for your suggestion.
So should I close the exports fund ? though it is giving high than any funds currently in my portfolio. And which fund house should I choose ? can you plz suggest ? and how to go forward. and how do I contact you personally ?
Dear Samrat,
If you understand the risks associated with a Sector/thematic fund like ICICI Exports fund, You may stay invested.
Regarding best Equity funds, suggest you to read my article :Top 15 best Equity funds. Kindly go through it and consider selecting one fund from each fund category.
Also read : Top balanced funds.
Hi Sreekanth,
Wonderful advice on various topics. Could you please give your comments the recently launched Sukanya Yojna also ?
Regards,
Jitesh
Dear Jitesh,
Thanks for your appreciation.
I have written around 5 articles on Sukanya Samriddhi Yojana. Click here to read the review.
Hi Sir,
I check your Retirement Calculator and I adjusted some of your inputs, ret age 55 yr.
Monthly investment required - 34 Thousand as per your calculator
My Planned Portfolio
Invest 70% in Equity/Balanced FD and rest 30 % in FD,RD,PPF etc
Now I my Investments are
PPF - Last 8 years - full amount Now Bal 9L
One LIC jeevan saral - 24 thousand yearly for SA 5L
RD - 10 thousand Per month (For maintaining some Liquid cash in case JOB Lay off etc) for last 15 months (Target 3.5 L)
I have invested SIP in UTI Opp G fund for Last 3 years Rs 1000/~ .
Recently it is matured and amount is good. So gained exp in MF.
My Plan -
======
My Home Loan EMI will be completed with in 4 months Hence I can HAVE 12 Thousand to invest in MF to reach the GOAL.
Now How Can I invest or optimize my Investment 12 thousand ?
70% of 12 thousand in Large CAP Equity Fund Like UTI opp G or Franklin India Prima Plus
30 % of 12 thousand in Mid + Small Cap Like - HDFC Mid Cap or Franklin India smaller Companies Fund
OR
30 % in balanced Fund Like HDFC prudence / HDFC Balanced/ Tata Balanced Fund
Note-
1) Is it a good choice to invest 20-30% of My PPF investment (12500/~) to a Balanced MF
2) RD 10 thousand will be invested in MF
Please guide
Thank you,
shankha
Dear Shankha,
So, you have around 21 years to go for your retirement.
Suggest you to invest aggressively in Mutual funds for the next 10 years or so.
Consider investing 40% of your planned amount in a Large cap, 40% in Midcap oriented Fund & 20% in a Balanced fund.
Yes, you can also consider allocating some part of your PPF contribution to a balanced fund for next 10 years.
I can not plan for invest 34 Thousand ( as per your calculator) in this moment.
12-15 thousand Max.
Question - 1
As per your guide line when I invest .. should I devide my money to ( 40% + 40% +20%) ?
In the curent case for Rs 12000 = 4800 (Large)+ 4800 (Mid) + 2400 (balance)
OR
Question 2
As per your 2 other post , I found balanced fund return over Large Cap in long term ( >5 yrs) is more or less same or even Better in case of HDFC prudence / HDFC Balanced/ Tata Balanced Fund -
How this can be justified
Question -3
Can I invest (SIP) in any time irrespective of the Market ?
Dear Shankha,
I personally prefer investing in Balanced funds and I am satisfied with the Returns ( as per my goals)..
If your goal year is > 10 years from now, suggest you to invest in same proportion in Large / balanced / mid-cap. Yes, anytime is good time to book SIPs. Go ahead!
I am Shivkumar Kurnawal (age 34 year) working in a BSNL, Public sector Undertaking as a Jr. Telecom Officer at Pune.
My son omkar Kurnawal (age 4 years) now taking admission for L.K.G., My wife is homemaker. We are family of three.
Sir, i want suggestion/guidance for investing money for the education of my son & want plan for retirement.
Now he his of 4 year old. At his age of 17/18, i.e. after 13/14 year his higher education will start may be medical/engg/Management as pr his choice, so i want certain lump sum about minimum of 40 lakhs.
My Salary & current investment details are as given below
After deductions of home loan EMI take home pay is=30,000/-
My home expenses=17,000/-
Personal/Home Loan=12, 00,000/-
of which Rs.2,00,000/- is paid, Monthly EMI of Rs.15,000/- deducted from my account.
My PPF account- investing ----Rs.12000/Annum........currently hold Rs. 50,000/-
My Son, Omkars PPF account--- Rs. 6000/annum.........currently hold Rs. 6000/- opened in dec-14
Towards Employees providant fund my salary deduction is
7000/- which is 12 % of basic salary+DA
My Current Investment detail are as follows:---
1. HDFC Children Gifts - Investment Plan - Direct Plan - Growth --------Rs.25000/- lumpsum invested in month of oct-2014
SIP:
HDFC Mid-Cap Opportunities Fund - Growth - Equity - Diversified---- Rs.1000---monthly
2. Reliance Growth Fund - Direct Plan - Growth - Equity - Diversified---Rs.1000-monthly
3. SBI Blue Chip Fund - Growth - Equity - Diversified----Rs. 5000-----one time investment
4. Reliance ELSS fund: ---------Rs.500---monthly.
Insurance:
SBI E-SHIELD POLICY FOR Rs. 30 lakhs for year of 30 year----- yearly premium is ---Rs.7500.
KINDLY SUGGEST suitable investment strategy to meet my goals.
Pl. intimate me if any other details are required.
Thanking You.
PL GIVE YOUR CONTACT NUMBER SO THAT I WILL CALL YOU..
9422831050
Dear SHIVKUMAR,
Suggest you to re-look at your total life insurance coverage. Consider taking an additional life insurance coverage of around Rs 30 Lakhs.
Do you have health insurance cover?
You may re-allocate some percentage of your PPF contributions to HDFC Children's Gift fund, this can be for your kid's education goal.
Nice article.
When a person doing a job he may have some deduction as PF from employer. The PF amount can be in the range of 50 - 60 Lakh. Can this be factored in the above calculation.
Dear Kalpesh,
Yes, you can deduct the EPF fund value from the 'Required Retirement Corpus' (Cell no B20), and the 'required savings per month/year' values are auto-calculated.