How to calculate the retirement corpus?

POSTED BY Paul ON February 14, 2013 1:08 pm COMMENTS (5)

Hi All,


How do you calculate the corpus required for retirement? Caluclating the retirement corpus is not same as other milestone goals. For all other milestones like, buying house, child marriage etc, I need to invest till that time. And I will be using the money in one shot. But in retirement, I will be using this money gradually.

I am planning to retire after 25 years. Suppose, I need rs. 50,000 per month (now) for expenses.

Considering an inflation of 7%, after 25 years it would be equivalent to rs. 137951.59 per month. For an year, I would need 137951.59 * 12 = 1655419.08.

I need rs. 1655419.08, after tax for my yearly expense. My income pre tax should be 2364884.4 (assuming 30% tax bracket).

To get this amount as returns (8%), I need a corpus of rs. 29561055. For my retirement, I need a corpus of around 3 crore. Is this how we calculate the corpus for the retirement?

Suppose I live for another 20 years after retirement. How do we account for the inflation during that time? If I dont account for the inflation, then after 20 years, I will still have savings of 3 crore. 

Since my goal is long term (25 years), I could go for equity. What is a safe return that I can assume from equity? Can I assume 12% returns? 

If I assume 12% returns from my investments, I need to invest 15967.24 per month for my retirement corpus to be 3 crore. How much more should I invest for adjusting the inflation in the retirement years?



5 replies on this article “How to calculate the retirement corpus?”

  1. Dear Paul, glad to know that you found the calculator useful. Now as the target is clear to you, start investing for it. Apart from your mandatory PF, please do not add more debt for your retirement corpus. As & when, your income increases, try to put more money into retirement investments.



  2. Paul says:


    Thanks all for your answers. I found this nice calculator in Jago Investor itself. When I check the corpus required it is saying that I need around 5.5 crore after 25 years to be financially independent. And I need to invest a huge amount of 34307 each month for the next 25 years.

    I feel I can retire only after 30 years. Even if the corpus required is around 7.7 crore, the monthly investment amount has come down drastically to 26585. This is also a little difficult at this time. So I will invest incrementally. Every year I can contribute 5% more than the previous year. Like that I should be able to achieve the goal easily.

    Since this is going to be biggest goal of my life, I need to start this immediately. Since this is a looong term goal of 30 years, should my portfolio for this investment contain only equity? Anyway I have my EPF as debt part. Should I add more debt components in the portfolio for this goal?

    Thanks for the excellent calculator.


  3. Dear Paul, your basic thinking process is ok. Let me add my 2 cents. The way you are calculating your inflated income requirement @ age 60, please calculate on same line for age 75. Now calculate @ 6% post tax return, what corpus ‘ll give this income?

    This corpus is your target. It may be a very dramatic number. Say 8 or 10 or 12Cr. Now how to reach that target in next 25-30 years, ‘ll be your next calculation & act accordingly.

    Just a small note – even in your post retirement years, you need to invest a good part in Eq. to combat inflation.



  4. Dear Paul,

    Use this

    to figure out how to calculate.

    Under ‘articles’ you can find a simple description of “How Retirement Calculators Work” with a link to formuale

  5. Ramesh says:

    As some rules, use following parameters:
    1. Use Real returns instead of Nominal Returns. Real returns = nominal – Inflation.
    2. In general, if you use about 4% of your retirement corpus (US data of present, but I would assume that to be a conservative estimate for our country) as yearly expenses, then you can mostly assume that your retirement kitty will go on forever. So, you need that much value of real returns on your retirement corpus over longer terms.
    3. So, in your case, 50k * 12=6L. And 6L * 25= 1.5 crore in today’s values.
    4. Then just try to invest accordingly in real return manner.

    In real returns- debt fetches you 8-10= -2%. Equity can fetch you around 5-6% over longer terms.

    Also, 1.5L will become 1.65L next year. So you need to do all the calculations accordingly.

    And try to keep things simple. So many numbers will only confuse you.

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