Retirement Planning: Will Rs 5 crore retirement corpus be sufficient for you? Know why it may not be

Retirement Planning: How much is Rs 5 crore? To put it into perspective, if you invest it in a mutual fund from which your expected annualised return is 7 per cent and start a systematic withdrawal plan (SWP), you can draw a monthly estimated income of Rs 330,700 for 30 years. If you invest it in an equity fund from which you get a long-term annualised return of 12 per cent for 20 years, it will swell to Rs 48.24 crore.

By any stretch of the imagination, an Rs 5 crore amount is sufficient for a large number of Indians to spend a financially free retirement.

But if you are 30 years old with Rs 40,000 monthly expenses, will the same amount be sufficient for you 30 years from now for a 20-year-long retirement phase?

Through our calculations, know why it may not and what you may target.

What may be your retirement corpus? 

Let’s assume you are 30 years old, expect to retire at 60 years of age, and want money till 80 years of age; the corpus is calculated adjusted against inflation till the last day of your retirement.

Now if you earn Rs 30,000 a month and maintain the same lifestyle for 20 years post retirement, you need to know your monthly amount till the last month of your life’s 80th year.

If you have other financial goals post retirement, the amount will be inflated to the age you want to achieve it and added to the required corpus. 

Your monthly expenses at 80 years of age

If you are 30 years old and your monthly expenses are Rs 50,000 a month, your life expectancy is 80 years, and the inflation rate is 6 per cent, this is how your expenditure will rise every year if you want to maintain the same lifestyle till the last year of your retirement. 

You can see that if you want to start your retirement at 60 years of age, your monthly expenses will rise to Rs 2,87,174.56 .

If you need your corpus till 80 years of age, in the last year of your retirement, the estimated monthly expenses will be Rs 9,21,007.71. 

Retirement corpus you require to maintain same lifestyle 

You have seen how we factor in inflation to calculate the future monthly expenses.

Now if you want to know the retirement corpus you require, the other important factor required is the post-retirement investment return.

Considering a 6 per cent inflation and 7 per cent annualised post-retirement return, you need an estimated corpus of Rs 6,31,32,564.16 for your 20-year-long retirement period. 

Now let’s see what should be your corpus if your monthly income is in the Rs 30,000-Rs 100,000 range. 

You can see that if your monthly expenses are Rs 30,000, your estimated retirement corpus will be Rs 3,78,79,538.49, while if your expenses are Rs 1 lakh/month, you may require an estimated corpus of Rs 12,62,65,128.32.

If you look at the table, if your current expenditures are Rs 40,000 a month, an Rs 5 crore retirement corpus may be insufficient for you.

What you need to do 

You need to calculate the amount you require for your retirement and invest according to achieving that goal.

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)