How to Calculate Your Retirement Corpus for Indians

Misconception

For securing your future finances it is important to look into retirement planning. It is popularly believed that a pension and savings are enough to sustain a comfortable life after retirement. Although this may be true for Indian government employees the situation is different for those working in the private sector or those who are self-employed.

Why is planning important?

People many times realize later on that their retirement savings are not sufficient to sustain their lifestyle and expenses. At then rely on their family members for financial aid. This is not ideal as it adds a burden on others and creates dependence. At times people resort to starting work again.

What to understand

Looking into specific aspects of retirement planning and exploring essential factors of retirement corpus are essential in planning for your future finances.

Retirement corpus

The amount you require for retirement is likely not the same as others. Various factors come into play such as personal lifestyle, inflation impact, and your sources of retirement income. Several formulas have been created by financial planners and experts to help you calculate an estimate of your retirement corpus.

Common Formula

A common formula can aid you in generating a figure for your annual expenses. Next, you decipher how many years you plan to retire in. You then these two numbers and multiply them.

30X Rule

In India, the 30X Rule for retirement planning is a popular formula. You need to take the figure of your current annual expenses and multiply it by 30. This provides you with the figure of approximately how much money you need to retire comfortably.

Example of 30X Rule

In simple words, your retirement corpus should at least accumulate to 30 times your present time annual expenses. Lets say your age is 50 and your monthly expenses total Rs 75,000, and that comes to Rs 9 lakh for the whole year. The 30X rule states that you need approximately Rs 2.7 crore (30 multiplied by Rs 9 lakh) for a secure retirement.

Factors to consider

Many factors must be considered when totaling your retirement corpus. Have a look at your investments and pay attention to what options you have chosen. This way you can determine an estimate of the return that you will be receiving. Also, you must note how much inflation can impact your expenses during your retirement. Note that prices of products and services are probable to rise over time. Also, consider healthcare and leisure activity related expenses.