How Much Money Do I Need for Retirement in India?

How to calculate retirement corpus?

Retirement planning isn’t a rocket science, but an act of discipline and dedication to reach that desired retirement corpus.

Let’s understand how to calculate what you might need.

Start with your current expenses

Let's say, currently you are spending ₹50,000 per month right now on basics which are groceries, utilities, transportation and other expenses.

After retirement, some costs drop (no work commute, children are independent) but others rise (healthcare, leisure). Most financial planners suggest you will need about 70% to 80% of your current expenses.

So if you spend ₹ 50,000 now, you might need ₹35,000 to ₹40,000 (at current rates) monthly after retirement.

The inflation reality

Here's what makes planning tricky. A ₹40,000 monthly expense today won't stay ₹40,000 in the future.

If you are 35 now and plan to retire at 60 (25 years away), assuming 6% average inflation, today's ₹40,000 becomes approximately ₹1,72,000 per month at retirement.

If you live for 30 years after retirement (quite possible with improving healthcare), you will need a corpus that can generate this income and as well keep pace with ongoing inflation.

Using basic calculations, you will need approximately ₹4.5 to ₹5 crores to generate this monthly income, assuming your investments grow at 8% annually.

A simple calculation method

Here we are assuming a sum of ₹50,000 to cover basic living expenses. We are not adding the housing or rental costs.

Calculation.

• Monthly expenses today- ₹50,000
• Retirement expenses (75% of current) - ₹37,500
• Years until retirement (age 35 to 60) - 25 years
• Adjust for 6% inflation - ₹37,500 becomes ₹1,61,000 monthly
• Annual need- ₹1,61,000 × 12 = ₹19.32 lakhs

For 30 years of retirement with 8% returns on corpus- approximately ₹4.5 crores needed

Income sources that help

If you have availed for Employee Provident Fund (EPF) or National Pension Scheme (NPS) and have scope for rental income, factor these incomes in above corpus calculations.

The healthcare wildcard

Medical costs are the biggest uncertainty. With people living longer, age-related illnesses become inevitable. A major illness can cost ₹5 to ₹20 lakhs or more and medical costs are ever rising.

Even with health insurance, co-payments and exclusions mean you need your own buffer. Plan for an additional ₹50 lakhs to ₹1 crore specifically for healthcare, separate from regular expenses.

The power of starting early

Compounding impacts significantly. Starting at 25 means saving ₹15,000 monthly to reach ₹5 crores by 60 (assuming 12% returns). Starting at 40 means saving ₹50,000 monthly for the same goal. The difference is dramatic. Every year you delay costs you lakhs in the final corpus.

The longevity factor

Given the increasing lifespan, you might live till 90. That's 30 years of expenses, healthcare and inflation to plan for after retirement.

Previous generations retired at 60 and lived till 70-75. Today's retirees might need funds for three decades, not one. This single factor has doubled retirement corpus requirements.