Retirement Planning: Age 35, Rs 40,000 monthly expenses; what will be your retirement corpus? How much you need to invest monthly and lump sum to achieve that goal
Retirement Corpus Calculations: The assessment of retirement corpus can help one plan in advance. If they know how much they need at their retirement, they can plan a monthly SIP or lump sum investment to achieve that goal.
Retirement Planning: If you are 35 years old today, do you know what your retirement corpus should be? Have you set any retirement age? Do you know how you can reach your retirement target? Are you aware of the factors that are considered for calculating retirement? These are questions some of us have a clear idea about. But most people have vague assessments of such factors. So, how should one calculate their retirement corpus, what factors should they keep in mind, and how much do they need to invest to reach their target? Get answers to these questions in this write-up. Also know what the retirement corpus should be for a 35-year-old with Rs 40,000 monthly expenses, and how much should they invest through a lump sum or monthly SIP to achieve this target?
Photos: Unsplash/Pixabay
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
What is retirement corpus?
A retirement corpus is the amount that will help you achieve financial freedom in your retirement period.
What is retirement age?
Retirement age is the stage when a person aspires to achieve financial freedom, where they have a passive income source to meet their expenses. There is no fixed age for financial freedom. It can be different for different people.
How is retirement corpus assessed?
Since we can't predict the future, the simple formula can be calculated for retirement based on your current monthly expenses.
What are factors considered for calculating retirement corpus?
Liabilities such as loans, life goals such as travelling abroad, and responsibilities such as children's marriage or education can be taken into account while calculating the retirement corpus. If an individual wants to achieve these before retirement, these things should be kept separate from retirement planning. In that case, the retirement corpus should meet your monthly expenses.
How inflation impacts retirement planning
We can take a standard inflation rate such as 6 per cent and calculate the inflation-adjusted corpus. If one takes retirement age as 55 and life expectancy as 75, they should know that from 55 to 75, their yearly expenses will rise at the inflation rate.
Retirement calculations
For our story, we will take the following example-
Age of person: 35 years
Monthly expenditure: Rs 40,000
Retirement age: 60 years
Life expectancy: 75 years
Inflation: 6 per cent
Expected return from pre-retirement investment: 12 per cent
Expected return from post-retirement corpus: 6 per cent
Current investments for retirement- Rs 300,000
What will be monthly expenditure at 60?
At 6 per cent inflation, the estimated monthly expenditure at 60 years will be Rs 1,71,675.
What will be future value of current investment?
At 12 per cent annualised return, the estimated future value of the current investment will rise to Rs 51,00,019.
Future corpus amount needed to meet expenses
It will be the investment value at 60-future value of current investment=
Rs 3,09,01,500-Rs 51,00,019= Rs 2,58,01,481 (estimated)
Number of years person needs to invest
25 Years
Lumpsum amount person needs to invest
The estimated lump sum amount they need to invest is Rs 15,17,729.
SIP amount you need to invest
The estimated monthly SIP amount they need to invest in a mutual fund scheme is Rs 13,597.
Retirement Corpus Chart
|
Year
|
Withdrawal Amount | Growth Amount | Balance Corpus Amount |
| Year1 | Rs. 20,60,100 | Rs. 18,37,741 | Rs. 3,06,79,141 |
| Year2 | Rs. 21,83,712 | Rs. 18,19,934 | Rs. 3,03,15,363 |
| Year3 | Rs. 23,14,740 | Rs. 17,93,160 | Rs. 2,97,93,782 |
| Year4 | Rs. 24,53,628 | Rs. 17,56,392 | Rs. 2,90,96,546 |
| Year5 | Rs. 26,00,844 | Rs. 17,08,515 | Rs. 2,82,04,217 |
| Year6 | Rs. 27,56,892 | Rs. 16,48,312 | Rs. 2,70,95,637 |
| Year7 | Rs. 29,22,300 | Rs. 15,74,462 | Rs. 2,57,47,799 |
| Year8 | Rs. 30,97,644 | Rs. 14,85,525 | Rs. 2,41,35,680 |
| Year9 | Rs. 32,83,500 | Rs. 13,79,941 | Rs. 2,22,32,121 |
| Year10 | Rs. 34,80,516 | Rs. 12,56,012 | Rs. 2,00,07,617 |
| Year11 | Rs. 36,89,352 | Rs. 11,11,896 | Rs. 1,74,30,161 |
| Year12 | Rs. 39,10,716 | Rs. 9,45,596 | Rs. 1,44,65,042 |
| Year13 | Rs. 41,45,364 | Rs. 7,54,947 | Rs. 1,10,74,625 |
| Year14 | Rs. 43,94,088 | Rs. 5,37,600 | Rs. 72,18,136 |
| Year15 | Rs. 46,57,728 | Rs. 2,91,012 | Rs. 28,51,421 |