How Much Money Do You Really Need for Retirement in India?

Step 1: Estimate Your Post-Retirement Expenses with PERP

Start by identifying your PERP, Percentage of Expenses for Retirement Planning.

If your current monthly expenses are Rs. 75,000, certain costs like children’s education and EMIs will likely go away. Your PERP may drop to around Rs. 50,000/month in today’s terms.

Step 2: Adjust for Inflation Over Time

Inflation erodes purchasing power. Using 7% annual inflation, Rahul’s Rs. 50,000/month PERP becomes:

• Rs. 2.7 lakhs/month at age 60 (25 years later)
• Rs. 5.4 lakhs/month by age 70

You must factor in continued inflation even after retirement. Static income won’t be enough.

Step 3: Calculate the Corpus Needed for Monthly Expenses

Assuming Rahul plans to live 20 years post retirement and expects 10% returns on his invested corpus, the amount he’ll need to accumulate is:

Target Corpus for PERP: Rs. 5.1 Crores

This figure is just for covering monthly expenses after adjusting for inflation and expected returns.

Step 4: Plan for Additional Retirement Needs

Medical Fund:

Senior citizen health insurance is costly and may exclude pre-existing conditions. Rahul should plan for:

Rs. 40 lakhs in today’s value = Rs. 2.17 Crores at retirement (for medical emergencies)

Leisure Fund:

Rahul wants to spend ~Rs. 1 lakh/year (in today’s terms) on travel from age 60–70:

Inflation-adjusted leisure goal: Rs. 50 lakhs

Spouse Longevity:

If his wife outlives him by 5 years, and she needs Rs. 25,000/month in today’s value:

Required savings: Rs. 25 lakhs today → grows to Rs. 2.5 Crores in 20 years (at 12% p.a.)

Step 5: Add It All Up

Total retirement needs:

• Rs. 5.1 Cr (PERP needs)
• Rs. 2.17 Cr (healthcare buffer)
• Rs. 50 Lacs (leisure fund)
• Rs. 2.5 Cr (spouse longevity)

Total Corpus Goal: Rs. 8+ Crores

It may sound overwhelming, but time and smart investing are on your side.

Committing 20% of your income to SIPs in equity mutual funds can help you reach this target systematically.