Retirement Planning: How Much Money Would You Require to Retire in India?


Planning for your retirement is a necessity that should not be put off at the last minute. You may have a pension to depend on, but it won’t cover all the expenses until you know the amount you need to retire. Thus, calculating the corpus you need to be self-sufficient will help you save up accordingly. So, let’s understand the amount of money you would need to retire without worry and also how to retire early


Sort Your Monthly Expenses

Your current monthly expense must consist of groceries, medicines, loans, travel expenses, bills, fuel expenses, and vacations. But many of these will not exist after your retirement. Thus, you need to sort your monthly payments into two, which will continue during retirement and others that won’t. Expenses like home loans, travel expenses, work-related costs, education loans, etc., will not continue. So, you can remove them from the monthly expenditure and calculate the sum which you will require.

Calculate Expected Income

Now, you need to calculate the expected income you will be getting after retirement. This includes a pension from National Pension System, a pension from your job, a corpus from insurance plans, income from other investment tools, etc. You can also include any payment that you will receive from a property. The total from this will be your expected income after retirement.

Determine Required Income

From steps 1 and 2, you know your various expenses and expected income. Now, you can calculate the payment required to suffice you. If your monthly expense is INR 40,000 and your anticipated monthly income is INR 30,000, you need INR 10,000 more for all your expenditure.

Work Out the Future Value of Income

Inflation plays a vital role in our lives, making our savings seem small for the future. Now that you have the required retirement income, you must include the inflation rate. From this, you can work out the future value of your income. The inflation rate can be calculated by taking an average of the long-term inflation rate, as the current rate will mislead your estimations.

Consider the Income Accumulated

You have now calculated the amount required after retirement with the above steps, but you need to see how much you should save for retirement. Various financial instruments enable you to save for your retirement. If you have already invested in such tools, you must calculate your current corpus. But if you haven’t started investing, you can begin now. Below given are some instruments that you can consider:

  1. Life Insurance policies
  2. Employees Provident Fund
  3. Public Provident Fund
  4. National Pension System
  5. Pension plans
  6. Mutual funds
  7. Bank deposits

Calculate the Growth of Corpus

If you have chosen any tools from the above options, you can calculate how much that amount will grow with a rough estimate. The growth will also depend on what kind of tools you opt for, market-linked and equity-orientated. Investing in equity funds will give you higher returns than most financial instruments.

Determine Required Sum

With figures like the amount you will require at 60 and how much your existing capital will grow by 60, you can estimate the sum you need at retirement.

Estimate the Amount You Need to Save Up

With all the above steps, you know the money you require, so it is time to determine how much you need to save. Though you may have ended up with a huge number, there is no need to worry. If you begin saving up at a younger age, you can accumulate the amount by the time you reach retirement age. This is due to the power of compounding to gain good returns in the future.

Add Up Current Investments

By adding your current investments, you can calculate how much more you need to invest to get the required sum in the future.

With this, you can begin your retirement planning and start saving up. You will also find a retirement planning calculator online to help you with the estimations.