How to Calculate Your Retirement Corpus
Your retirement corpus is the giant nest egg required to sustain your lifestyle after you stop working. To calculate this accurately, you must project your current living expenses into the future using inflation, and then determine how much total capital you need to generate that monthly income indefinitely.
Our calculator uses the Present Value of a Growing Annuity model. We assume that during retirement, your expenses will continue to rise with inflation, but your corpus will continue to generate returns. We calculate the exact "real rate of return" to figure out the bare minimum corpus required so that you never run out of money before your life expectancy age.
The Impact of Inflation on Retirement Planning
Inflation is the silent killer of retirement dreams. If your current lifestyle costs ₹50,000 a month, and inflation averages 6% a year, that exact same lifestyle will cost a staggering ₹2.87 Lakhs a month 30 years from now!
This means you cannot simply multiply your current expenses by your retirement years. Your target corpus must be massive enough to account for these inflated future expenses. If you fail to account for inflation in your spreadsheet, your money will lose its purchasing power, and you risk running out of cash decades too early.
Why Starting Early Reduces Your Monthly Burden
Because of the power of compound interest, time is your greatest asset. The "Required Monthly Savings" calculated above is essentially a Systematic Investment Plan (SIP) that needs to grow at your Expected ROI until you retire.
If you start investing in your 20s, your monthly burden is extraordinarily small because your money has 40 years to snowball. If you wait until your 40s to start saving, you will have to contribute significantly more out of your paycheck each month, as the compounding engine has drastically less time to do the heavy lifting for you.