The most common retirement question is also the hardest: how much is enough? A single number such as ₹1 crore or ₹5 crore is meaningless without knowing your expenses, your age, your life expectancy and how your money will be invested after you stop working.
This guide builds the number from first principles. It uses a worked example, shows how each assumption changes the answer, and explains why the popular 25x rule is a starting point rather than a plan.
Step 1: Start with expenses, not income
Retirement planning begins with what you spend, not what you earn. Add up your household's annual living expenses: rent or maintenance, food, utilities, transport, insurance premiums, school fees, travel, gifts and medical costs. Exclude loan EMIs that will be repaid before retirement, and include expenses that will start later, such as higher health insurance premiums.
A useful cross-check is your current savings rate. If you spend ₹60,000 a month and save the rest, your retirement lifestyle is closer to ₹60,000 than to your gross salary. Most retirees need 70–90% of their pre-retirement expenses, not 100% of income.
Step 2: Inflate expenses to retirement
Prices rise. If your current annual expense is ₹7.2 lakh and retirement is 25 years away, a 6% inflation rate takes it to about ₹30.9 lakh a year. The formula is current annual expense × (1 + inflation)^years.
₹60,000 monthly expense inflated at 6%
| Years to retirement | Annual expense at retirement | Monthly equivalent |
|---|---|---|
| 10 years | ₹12,88,000 | ₹1,07,300 |
| 20 years | ₹23,09,000 | ₹1,92,400 |
| 25 years | ₹30,90,000 | ₹2,57,500 |
| 30 years | ₹41,35,000 | ₹3,44,600 |
This is why a corpus that sounds large today may be modest in 25 years. The inflation adjustment is not optional; it is the difference between a plan and a wish.
Step 3: Decide how long retirement will last
Use a realistic life expectancy, not an optimistic one. If you plan to retire at 60 and want the money to last to 90, that is 30 years. Couples should plan for the longer of the two lifespans, and a little extra for safety.
Longevity risk is the risk of outliving your money. It is one of the main reasons retirement planning is different from a normal goal: you cannot simply buy fewer things if the money runs out.
Step 4: Choose a post-retirement return
After retirement, the portfolio usually shifts towards stability. A common assumption is 7–8% nominal return for a conservative mix, against 6% inflation. That gives a real return of 1–2%. If you assume a high equity return in retirement, you may understate the corpus you need.
Sequence of returns matters
A market fall in the first few years of retirement is more damaging than the same fall later, because you are withdrawing from a smaller portfolio. A cash buffer of 2–3 years of expenses can reduce this risk.
Step 5: Calculate the corpus
The corpus is the present value of a stream of inflated-adjusted withdrawals. A simple approximation uses the real return: corpus = annual expense at retirement × [1 − (1 + real return)^−n] ÷ real return, where n is the number of retirement years.