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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Very informative article explaining retirement planning in a simple 3-step structure. Many people underestimate the impact of inflation on future expenses, and this calculator clearly shows how important it is to start early. Having clarity on the retirement corpus requirement helps individuals make better investment decisions today. Along with such calculators, using Personal Financial Planning Software can further simplify goal tracking, scenario analysis, and long-term financial projections. Combining the right tools with disciplined investing can significantly improve retirement readiness.
Thanks for sharing such practical insights!
Thank you so much for your thoughtful feedback 😊
Glad you found the 3-step approach and the calculator useful — you’re absolutely right, inflation is often underestimated, and that’s where early planning makes a big difference.
Also agree with your point on using financial planning tools — they can definitely help in tracking goals and making more informed decisions over the long term.
Appreciate you taking the time to share your insights 🙏
Hey Srikanth
According to calculator, my retirement corpus will not sustain if my spouse is younger to me.
I do not understand why spouse age is not considered in the calculations. Retirement corpus should be for both to survive, not the single person.
Correct me if I am wrong.
Dear Ritz,
Kindly note that one can consider living expenses of his/her entire family and can project the required retirement corpus.
Hi,
What is your views on tata retirement savings fund? Do you have any article on it?
Dear Chandra,
It is a decent fund with two options - Moderate (Balanced) and Progressive options.
Unlike regular Equity funds, retirement oriented funds have certain certain & conditions for investments and redemptions. So, personally I prefer to invest in general equity funds.
You may kindly go through below articles related to similar retirement oriented funds;
* Reliance Retirement Fund – Equity Oriented Pension Scheme- Features & Review
* HDFC Retirement Savings Fund – Tax Saving cum Pension Scheme – Details & Review
Dear Sir,
I want your advice related to Pention. My age is 48 yrs. Kindly guide me. I am from Pune. Or suggest me a person, who can guide me. My Mobile Number is +9199220119**. I am badly need of your genuine advice. Please guide me. Waiting for your SMS. My email address is rajeshdalvi**@gmail.com.
Thanks & Warm Regards,
Rajesh Dalvi,
Pune.
+9199220119**.
Dear Rajesh,
In case, you are looking out for a financial planner, you may kindly go through this article @ My List of popular Fee-only Financial Planners | Based on my interactions & observations
Hi Srikanth,
Thanks for throwing light and emphasizing the need for retirement planning. I am 31 now and have decided to choose mid-cap funds to accumulate my retirement income. I arrived at this option since my investment horizon is 15+ years. Could you please suggest which fund-house to choose?
Also, due to recent changes in LTCG taxation, are the mid-cap funds still the best bet for long term investment horizon? I am slightly worried about amount I will be losing as part of taxation.
Dear Arun,
Kindly do not invest in a product based on just tax implications alone. They may not remain the same..
Kindly go ahead with your investment plan.
Related articles :
Why your Best Mutual Fund Schemes may not remain as ‘the best’? | Categorization & Rationalization of MFs
10% LTCG Tax on sale of Stocks/Equity Mutual Funds | Budget 2018-19 Proposal
Budget 2018 LTCG Tax on Equity Mutual Funds & Important Implications
Dear Sreekanth,
Srikanth Varma here again asking for little more details on another topic. :-)
As always, very good write-up on the retirement planning. I really get motivated with your blog. Really appreciate your effort.
I've used "Retirement-Planning-calculator.xls" to estimate my per month saving for retirement planning.
Now question is "How do I take my EPF contribution into retirement planning?"
Ex: As per my inputs into the XLS, I've got the recommendation as 54K / per month with 9% yield, 44K /per month with 10% yield and 28.5K /per month with 12% yield. My question is how to input the EPF contribution of 15K/per month with 8% yield and get the final recommendations?
Thanks once again for your efforts to make everyone financially literate.
BR, Srikanth Varma
Dear Srikanth,
The calculator provided here is a very basic one :)
Your EPF corupus accumulation can be dependent on many factors, your current & future salary, hike, rate of interest, period of service, partial withdrawals if any etc.,
Suggest you to kindly visit this link to find comprehensive Retirement calculators..
Dear Sreekanth,
I chanced upon your website, when I was googling for financial advice. You have been doing yeoman service to people. May god bless you.
I am 49. Typical middle class family. Currently based out of Mumbai. Live in our own house.Not much in terms of liquid assets beyond PF, LIC policies etc. However, no other obligations. Fed up with city life and wish to relocate to our village. My wife and I configured that we can have a comfortable life if we had a monthly income of Rs.25000/- . So, we decided to start putting monies into debt funds with a target that we put in Rs. 25 Lakhs in the next 3 years.
Now, my questions are :
1. Are debt funds the optimal solutions?
2. Should I go with aggressive monthly income plans now and move to debt funds just before shifting?
3. Can you please suggest alternatives if I am all wrong?
4. Can you also recommend schemes which we should consider.
Thanks in advance.
Dear Krishnan,
Thank you for your appreciation & kind words :)
Kindly do account for INFLATION when you are calculating the projected monthly expenses.
1- Yes, reason : short investment horizon. If you would like to take a bit of risk, you may allocate a portion of your investible surplus to an MIP Fund.
2 & 3 - You may have a mix of Debt Funds + Arbitrage fund + MIP.
To accumulate Rs 25 Lakh in 3 years from now at expected rate of return of 9%, you have to invest around Rs 60k per month.
Hi Sreekanth
I invested around 15L in MF on lump sum basis in various funds. i dont want to touch it for next 15 years. majority invested is HDFC Prdudence grwoth around 5L and Frankin india Prima fund 5L , Birla sun life equity fund 1.5L and ICICI prudence 1L need your advise whether it is ok
Dear Raghu,
Good funds. You may kindly continue with your investment plan.
What is the Scheme name of ICICI?
Is it not possible for a retired person to invest in Equity based balanced fund and starting SWP after 1 year at a reasonable rate say 8% p.a. so that his income would be tax free and and fund corpus also grows steadily?
Dear Rupali,
Why not, it is possible! :)
It all depends on ones investment objective, profile & time-frame.
DEAR SREEKANDH,
I am 48 years old and planning for retirement.
running a consultancy of my own.
Can accumulate for next few years say upto 59 years.
expecting monthly return of Rs.40k ASSURED afterwards.
What should i do?
i am not well versed in market funds in that case should i go for conventional retirement plan
can you please suggest me the right plan.
Thank you in advance
Dear john Ji,
Do you have any existing corpus/investment or other sources of income?
Or, Do you need to start the retirement planning from scratch now onwards?
To get Rs 40k per month income, during projected retirement life between 59 to 80 years, at expected return of 9% and inflation of 8%, you need to have retirement corpus of around rs 90 Lakh.
So, you have 11 years from now to accumulate this corpus.