Planning retirement can be daunting, especially when estimating the amount of money one would need to live comfortably. Future monthly expenses can be a good starting point. If you expect to spend around Rs 50,000 a month, then how much should you save today?
This isn’t just about a lump sum. You need to ensure a steady, inflation-adjusted income that lasts at least 25 to 30 years after you stop working. Down the years, Rs 50,000 won’t hold the same value as today, so your retirement corpus must account for rising costs, longer lifespans and healthcare needs.
To make sense of the numbers, Aparna Shanker, CIO – Equity, The Wealth Company Mutual Fund (Wealth Company Asset Management Holdings Private Limited), breaks down what is needed to sustain Rs 50,000 monthly expenses after retirement.
Account for inflation
If your monthly expense at the time of retirement is expected to be Rs 50,000, it translates to an annual outflow of Rs 6 lakh. To sustain this level of spending through your retirement years, you need to build a corpus that can comfortably support inflation-adjusted withdrawals over 25 to 30 years, says Shanker.
Assuming a conservative post-retirement return of around 7–8 percent and an inflation rate of 6 percent, the real rate of return is approximately 1.5–2 percent. Using a safe withdrawal rate of 3.5 percent, which is more realistic in the Indian context given the inflation trajectory and increasing life expectancy, you would require a retirement corpus of approximately Rs 1.7 crore (Rs 6 lakh ÷ 0.035).
Save, invest smart
To accumulate this over a 20-year earning horizon (say, from age 40 to 60), disciplined investing becomes key. A systematic investment plan (SIP) of around Rs 15,000–Rs 17,000 a month in a well-diversified portfolio — mainly equity mutual funds for growth and some allocation to debt for stability—can help you reach this goal, assuming a 12 percent annual return, she says.
A smart strategy is to increase your SIP contribution by at least 10 percent annually, or in line with your salary hikes, to stay ahead of inflation and fast-track your corpus accumulation.
It’s also essential to consider asset allocation based on your risk profile. Typically, a mix of 70 percent equity and 30 percent debt during accumulation years works well. Nearing retirement, you can shift to a more conservative stance to protect your corpus.
Finally, account for taxes on returns and withdrawals, and ensure you have a separate provision for healthcare and unforeseen expenses. Retirement planning is not just about wealth accumulation—it’s about securing dignity, freedom, and peace of mind in your non-working years.
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