Retirement planning calculates the corpus you need to accumulate by retirement age to sustain your lifestyle throughout retirement. It accounts for inflation increasing your expenses and investment returns growing your savings.

How the calculation works

Corpus Needed = Annual Expense at Retirement × (1 - (1 + r)^-N) / r

Where:
r = Real Return (Post-retirement Return adjusted for Inflation)
N = Years in Retirement
Annual Expense at Retirement = Current Monthly Expense × 12 × (1 + Inflation)^Years to Retire

A quick example

Let us calculate retirement needs for a typical professional:

Current Age:30 years

Retirement Age:60 years

Life Expectancy:85 years

Monthly Expenses:₹50,000

Inflation:6%

Step by step

1.Years to retirement: 60 - 30 = 30 years
2.Years in retirement: 85 - 60 = 25 years
3.Monthly expense at retirement: ₹50,000 × (1.06)^30 = ₹2,87,175/month
4.Annual expense at retirement: ₹2,87,175 × 12 = ₹34,46,100
5.Corpus needed at 7% post-retirement return, 6% inflation: ~₹8.5 Cr

So the answer is: Corpus Needed: ₹8.5 Cr | Monthly SIP at 12% return: ₹25,000 | Existing savings reduce the gap

Frequently Asked Questions

How much corpus do I need for retirement?

A common rule of thumb is 25-30 times your annual expenses at retirement. For ₹50,000 monthly expenses (₹6L/year), you would need approximately ₹1.5-2 Crore at today's value, adjusted for inflation.

What is a safe withdrawal rate?

The 4% rule is widely recommended — withdraw 4% of your corpus in the first year of retirement and adjust for inflation thereafter. For a ₹5 Cr corpus, that is ₹2,00,000 in the first year.

How does inflation affect retirement planning?

Inflation is the biggest risk to retirement. At 6% inflation, expenses double every 12 years. Your retirement corpus must grow at a rate higher than inflation to sustain your lifestyle.

What are the best investments for retirement?

During accumulation (pre-retirement): equity mutual funds, NPS, PPF, EPF. During withdrawal (post-retirement): debt funds, SWP from hybrid funds, SCSS, annuities.