Retirement Planning: Current age 35 years; monthly expenses Rs 40,000; retirement age 60 years; what should be retirement corpus and monthly SIP investment?
Retirement Corpus Calculator: Knowing how much amount you need at retirement and what should be your investment or income source to achieve that goal is important for everyone seeking a comfortable life post retirement.
Retirement Planning, Retirement Corpus Calculator: Retirement planning is important for everyone seeking a comfortable post-retirement life. It should not be delayed. One should start investing or creating income sources from an early age. The advantage of starting it early is that the early starter gets more years for compounding of their investments compared to a late starter. So, even if their investments are smaller than the investments of a late starter, early starters can have a larger retirement corpus. In this write-up, know how the retirement corpus is calculated and what will be the estimated retirement corpus for someone who is 35 years old and has Rs 40,000 as monthly expenses.
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(Disclaimer: This is not investment advice. Do you own due diligence or consult an expert for retirement planning.)
What is retirement corpus?
Retirement corpus is the amount that one needs at the time of retirement. This includes liabilities, loans, and the amount they need to run their daily expenses.
Factors to calculate retirement corpus
The current age, retirement age (when you won't have an active source of income), and life expectancy are the main factors in calculating a retirement corpus.
Inflation
The expected inflation in India can be 6 per cent. So, when you are calculating your retirement corpus, you should remember that the expenses are likely to rise by 6 per cent till the time you live. So, the retirement corpus should not exhaust by then.
Is the existing corpus helpful?
If you already have a corpus, which is not an emergency, and you can use that at retirement, you can deduct that amount (post-tax returns) from your targeted retirement corpus.
Retirement Corpus calculation
Here, we are calculating the estimated retirement corpus for a 35-year-old person with Rs 40,000 monthly expenditure. When we calculate the retirement corpus, we assume that the person's lifestyle will remain the same after retirement.
Retirement age and life expectancy
We are considering 60 years as the retirement age and 80 years as the life expectancy. So, the person needs corpus for 20 years after retiring.
Return from investments
We are calculating pre-retirement returns at 10 per cent and post retirement returns from the corpus at 5 per cent.
Current accumulated corpus
We are assuming 0 accumulated corpus.
What will be monthly expenses at 60?
The estimated expenses at the 6 per cent inflation rate at 60 years of age will be Rs 1,71,674.83, or Rs 20,60,098 yearly.
Corpus required at 60
The estimated corpus required at 60 years will be Rs 4,51,51,663.
Monthly SIP investment required to achieve that goal
At 10 per cent annualised return, the monthly SIP investment to achieve that goal will be Rs 34,030.
Monthly SIP investment required to achieve that goal
The total investment in 25 years will be Rs 1,02,08,889, and the expected gains will be Rs 3,49,42,774.