The most common answer people give when asked about their retirement corpus is "₹1 crore." It sounds like a large number. But run it through an inflation calculator and you'll quickly see why that figure is dangerously insufficient for most urban Indian households.
The Inflation Problem
If you retire today and spend ₹50,000 per month, your expenses 20 years from now — assuming 6% annual inflation — will be approximately ₹1.6 lakh per month. That's a tripling of your monthly outgo. Over a 25-year retirement, the total you would need to sustain that lifestyle crosses ₹3.5 crore, without even accounting for healthcare inflation, which tends to run at 10–12% annually.
A Simple Framework
Rather than guessing a number, use this three-step approach:
Step 1 — Estimate your monthly expenses at retirement in today's money. Be honest: include housing costs, food, travel, lifestyle, and a significant healthcare buffer.
Step 2 — Project that number forward to your retirement year using an inflation rate of 6–7%.
Step 3 — Apply the 4% withdrawal rule (modified for India) or use a more conservative 3.5% rate, which accounts for Indian inflation being higher than Western markets. Divide your annual retirement expense by this rate to get your required corpus.
Example: Monthly expense today ₹60,000 → 20 years at 6% inflation → ₹1.92 lakh/month at retirement → ₹23 lakh/year → Divide by 3.5% → Required corpus: ₹6.6 crore.
What This Means for Your Investments Today
The good news: you don't need ₹6.6 crore in the bank today. You need a disciplined investment plan that grows your money at a rate faster than inflation. A well-structured SIP in diversified equity funds has historically delivered 11–13% CAGR over long periods — which means even modest monthly investments, started early, can reach this corpus.
The bad news: every year you delay costs you significantly more. Starting 10 years later could mean tripling your required monthly SIP to achieve the same outcome.
Don't Forget Healthcare
Healthcare is the most underplanned retirement expense. Medical inflation in India averages 10–12% annually. A hospitalisation that costs ₹3 lakh today will cost ₹20 lakh 20 years from now. This is why a dedicated health insurance policy with a high sum assured — independent of your investment corpus — is non-negotiable.
The Right Step Forward
Retirement planning is not a one-time calculation. It's a living plan that should be reviewed every year. Your income changes, your family situation changes, and markets evolve. The best thing you can do is start with a clear number, build a plan, and revisit it regularly with a qualified advisor.
At Arthsiddhi Financial, we help clients run this analysis in our first meeting — with no obligation. If you haven't done this yet, consider it your most important financial task this year.