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