How much is enough

Your retirement corpus is the money you need on the day you stop working so that, invested sensibly, it pays your expenses until the end of your life. The number is usually large, often several crore, and that is mostly inflation at work. It looks less frightening once you see how it is built and how long you have to get there.

How the number is built

1. Start with today's monthly household expenses, excluding EMIs that will end before you retire.
2. Grow them by inflation until your retirement age. At 6% a year, prices roughly double every 12 years.
3. Work out the sum that, earning a modest return after retirement, can pay those rising expenses every year until about age 85.

A worked example

Meena is 35 and her household spends ₹50,000 a month. She plans to retire at 60. At 6% inflation, the same life will cost about ₹2,15,000 a month by then. To pay that, rising with inflation, for 25 years while the money earns 7%, she needs a corpus of about ₹5.8 crore at 60.

That sounds impossible until you count time. EPF, PPF and NPS already count towards it. A SIP of about ₹30,000 a month for 25 years at 10% grows to roughly ₹4 crore; raising it by 10% each year closes the rest of the gap.

A quick cross-check

Multiply your expected yearly expenses in the first year of retirement by 25 to 30. For Meena that is ₹25.8 lakh a year, so ₹6.4 crore to ₹7.7 crore. If the detailed figure and the quick one are in the same range, the plan is reasonable.

Closing the gap

• Start now: five years of delay raises the monthly SIP needed by about three-quarters.
• Raise the SIP with every salary hike, by at least 10% a year.
• Count EPF, PPF and NPS, and keep up voluntary contributions where the tax break helps.
• Do not dip into retirement money for other goals; give those their own SIPs.
• Working a few years longer, or cutting retirement spending, shrinks the corpus sharply.