# Retirement calculator

I am asked this question everyday….

“how much money do I need as a corpus if I have to retire today?”

well if you think you will live 30 years in retirement…you need about 40 times your annual expenses (at retirement age).

So if your monthly expenses are about Rs. 75,000 per month when you are 52…chances are it will be Rs. 1.5L at your age of say 60.

So 1.5L * 12*40 = Rs. 7.2 crores.

well $ 1.5 to 2 million is not a bad number to target…

of course there are far superior calculators available on the net…this is just quick and dirty…but when i talk like this..nobody likes it!

but not too many people have been able to dispute it either..it is actually a Charles Schwab ‘quick’ calculator..and I have seen it work.

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## Muthu

Just to be sure – Is it Rs.7.2 crores for the entire 30 year period?. How to extroplate this, if someone is 40 years now (& retired!) and would live for another 40 years?

## Smart Singh

Making a retirement calculator for Indian investors is extremely difficult. You’ll need to predict (or assume) inflation numbers, market returns and salary growth (for spending).

All 3 numbers in India are extremely volatile. The mean as well as standard deviation is quite high compared to developed markets. I just ask people to save 15-20% of their salary, apart from PF.

## subra

Muthu

the person who is 40 and can live till 85 will need more. Normally at 7.2 crore corpus with a 4-5% withdrawal rate should last for perpetuity, but since inflation, growth rates, medical expenses are all guesses, you may have to add a little bit – say 8-8.5 crs.

about Rs. 10 crores should be a number which should be a perpetuity kind of a figure…

## Aniruddha

I am 40, say at 55 I retire & expect to live upto age 85.

Thats 30 yrs.

Given yr analogy if today my expenses are 50K per month, one would need 50k x 40 = 20 lacs a month !!!!!!!!

Based on my financial consultants (who happens to be a certified CFP)

the corpus at 55 does not exceed 3 crores.

The difference between what you say & what I have been advised seems to large.

Can you throw some light here?

Regards

## subra

Aniruddha

if your expenses are 50k a month, your annual exp are Rs. 50*12 = Rs. 600,000 * 40 = Rs. 2.4 crores CORPUS….not per month..

i hope i have cleared your doubt…

## Rajeev

The trick is to ensure your retirement savings gain more than the inflation by some margin (about2%).

It is easy to make a calculator but as said above by smart singh, if the period of projection is large, then it is difficult to predict factors like inflation. I have made a simple excel calculator which seems to be a good beginning.

Be sure to make most of your long term expenses like a house, before you retire. Another thing to see is that you reduce your Income tax liability by prudent steps before you retire. Utilize all available ways of avoiding tax post retirement.

## DM

Am just 29 and these numbers looks scary..

My uncle died in 1994 or 95 and he had a insurance cover of 7 lakh ( incomes used to be quite low those days ).. Based on interest rates and avg monthly expenditure , one cud put that in FD and just live on interest without a thing to worry about. my aunt even thought about that.

She is still alive and today even 20k is nt enuff to run a house.. Within 10 years , value of 7 lakh diminished.

I guess Retirement is one scary thing for avg middle class indian who doesnt earn big and has no support from Govt. Dont know how much would i need 30 years down the line.

## Rajeev

DM,

Not so scary for you as you have years to plan. Fifteen years go, I had projected my own retirement saving reqmt to be 7 million and was worried about how the hell I will get this? Now calculating @8% inflation, my 70k monthly expense will become about 1.3 million per month in 25 years time. How wrong was I?

People who have written down targets normally achieve them. The value of compounding is really great. If you invest in good equity based instruments, you have good chance to reach your target. What the target is depends on your lifestyle. Just aim at maintaining the same expense level what you will be before retirement. Just to recall, at the top of Harshad Mehta’s boom, the BSE was just 800.

Regards