Inflation vs Retirement Corpus: Are you in your 25s or early 30s and thinking of creating a retirement corpus? It’s a good time to initiate retirement planning. The earlier you start, the earlier you are likely to achieve your retirement corpus goal. But how will you know the amount required to live a happy post-retirement life? Your expenses may be Rs 30,000 or Rs 1.5 lakh a month; you must know the right corpus required for post-retirement passive income. How will you calculate your retirement corpus? How will you factor in inflation in the calculation part? If you are 30 years old, want to retire at 60, and need money for the next 20 years, and have Rs 25,000 to Rs 75,000 in monthly expenses, how much retirement corpus do you require to maintain that lifestyle post-retirement? See our estimates to know- 

Things to calculate retirement corpus

Current monthly/yearly expenses
Years to retirement 
Retirement years 
Pre-retirement investment return
Post-retirement investment return 
Inflation rate
Existing corpus

Step 1 

If you are 30 years old, your monthly expenses are Rs 40,000, or Rs 4,80,000 a year. You need to know the yearly expenses in the first year of your retirement.

If the inflation rate is 6 per cent and you want to retire at 60 years of age, at that stage, your monthly expenses will be Rs 2,29,739.65, or Rs 27,56,875.76/year.  

Step 2  

If the post-retirement investment return is 7 per cent and the inflation rate is 6 per cent, then the internal rate of your investment return (IRR) will be 0.943 per cent.

If you want money till the age of 80, through IRR, you can calculate the total corpus required for 20 years.

In this case, the estimated retirement corpus will be Rs 5,05,06,051.33. 

Step 3 

If you have an existing corpus, calculate the future value of it in the first year of your retirement.

E.g., if you have Rs 5 lakh in your corpus where you expect to get a 12 per cent annualised return, its estimated value in 30 years will be Rs 1,49,79,961.

You can deduct this amount from the estimated corpus required; the remaining amount will be the corpus you need to achieve.

In this case, it will be Rs 5,05,06,051.33- Rs 1,49,79,961= Rs 3,55,26,090.33.

If there is no corpus to start with or the amount is higher or lower than Rs 5,00,000, the required corpus will change accordingly. 

Once you know your retirement corpus amount, you can plan your investments according to the years to retirement and the annualised investment return.  

Conditions for Calculations for story

For people with monthly expenses of Rs 25,000-Rs 75,000, we will calculate the retirement corpus required. Here are our conditions for calculations: 

Pre-retirement return- 12%
Post-retirement return- 7%
Inflation rate- 6%
Current age- 30 years
Retirement age- 60 years
Money required- For 20 years
Investment years- 30
 

Corpus required for people with Rs 25,000-Rs 35,000 monthly expenses

Corpus required for people with Rs 36,000-Rs 45,000 monthly expenses

Corpus required for people with Rs 46,000-Rs 55,000 monthly expenses

Corpus required for people with Rs 56,000-Rs 65,000 monthly expenses

Corpus required for people with Rs 66,000-Rs 75,000 monthly expenses

(Disclaimer: These are projections and not investment advice. Do your own due diligence or consult an expert for financial planning.)