Much retirement planning goes wrong before any investing begins, because the target is a guess — "a few crore should be enough". A better target comes from your own expenses, projected forward and funded across the years you expect to live in retirement. The arithmetic is not complicated. The assumptions are where the judgement lies.
Step 1: start with today's expenses
List what your household spends in a year, then adjust for retirement:
- Likely to fall: commuting, work clothes, EMIs that will be repaid, children's education, life insurance premiums.
- Likely to rise: healthcare and health insurance premiums, travel in early retirement, help at home later on.
- New or changed: rent if you will not own a home; support for parents or children.
For illustration, assume a couple aged 35 expect to need ₹60,000 a month in today's money for their retired lifestyle — ₹7.2 lakh a year.
Step 2: project to your retirement year
Prices rise every year until you retire. At an assumed 6% inflation over 25 years, ₹60,000 a month today becomes about ₹2.58 lakh a month — roughly ₹30.9 lakh a year — at 60.
That figure surprises most people. It is not a richer lifestyle; it is the same lifestyle, priced in future rupees. The Inflation Calculator shows the effect for any amount.
Step 3: fund a retirement of rising expenses
In retirement, expenses keep rising with inflation while the remaining corpus keeps earning a return. The corpus needed at 60 is the amount that can pay ₹30.9 lakh in the first year, rising 6% a year, for 25 years (to age 85), while the balance earns an assumed 7% a year.
In this illustration, that is about ₹6.9 crore at 60.
Two features of the calculation matter:
- Because the assumed return (7%) is only slightly above inflation (6%), the corpus barely grows in real terms, so it has to be large.
- Planning to 85 is a choice. Planning to 90 raises the illustrative corpus to about ₹8.1 crore. Outliving your money is the risk to plan around; ending with some left over is not a failure.
Step 4: test the assumptions
| Assumption changed | Illustrative corpus at 60 |
|---|---|
| Base case: 6% inflation, 7% return, to age 85 | about ₹6.9 crore |
| Inflation 5% | about ₹4.9 crore |
| Inflation 7% | about ₹9.8 crore |
| Post-retirement return 8% | about ₹6.2 crore |
| Post-retirement return 6% | about ₹7.7 crore |
| Plan to age 90 | about ₹8.1 crore |
Inflation is the strongest lever because it works twice: over the years before retirement, and again throughout it. Here, a one-point change in the inflation assumption moves the target by roughly ₹2 to 3 crore.
Step 5: subtract what you already have
Existing retirement savings — provident fund balances, NPS, mutual funds earmarked for retirement — will also grow until you retire. For illustration, ₹20 lakh growing at an assumed 10% a year for 25 years would be worth about ₹2.2 crore at 60. Subtracting that from the target leaves a smaller gap to fund.
Be realistic about what counts. A home you will live in does not pay bills unless you plan to sell or rent it.
Step 6: the monthly investment — and the cost of waiting
To build ₹6.9 crore from nothing over 25 years, a monthly SIP would need to be about ₹36,500 at an assumed 12% annual return, or about ₹51,700 at an assumed 10%. These returns are hypothetical; market-linked returns vary and can be negative over shorter periods.
Starting later changes the picture sharply. At the same assumed 12%:
| Start age | Years to 60 | Illustrative monthly SIP for ₹6.9 crore |
|---|---|---|
| 35 | 25 | about ₹36,500 |
| 40 | 20 | about ₹69,200 |
| 45 | 15 | about ₹1.37 lakh |
Waiting ten years nearly quadruples the monthly amount in this illustration. The Cost of Waiting tool shows the same effect for your own target.
A quick cross-check: the 25× rule
A common shortcut says you need about 25 times your first-year retirement expenses. Here, 25 × ₹30.9 lakh is about ₹7.7 crore — close to our estimate with a 6% post-retirement return. The shortcut gives a sense of scale; the step-by-step method is better for planning because every assumption is visible and adjustable.
What the number does not include
- One-time goals in retirement: a child's wedding, a home renovation, a car.
- A separate buffer for large medical costs that health insurance may not fully cover.
- Taxes on withdrawals and income, which depend on the products you use.
Turning the number into a plan
A retirement number is not a one-time calculation. Revisit it every year or two as expenses, savings and assumptions change. The Retirement Calculator runs these steps with your inputs, and the retirement planner turns the number into a goal you can track. As you get closer, using an SWP for retirement income covers how a corpus can become a regular paycheque.