Why do you need Retirement Planning?
Retirement planning is arguably the most important financial goal. With rising life expectancy and increasing healthcare costs, relying solely on standard pensions or savings is no longer enough. The silent wealth-killer, inflation, slowly reduces your purchasing power over time.
How is the required corpus calculated?
We use a combination of inflation indexing and the Safe Withdrawal Rate (SWR) rule:
- First, we calculate what your current monthly expenses will look like in the future based on your expected inflation rate.
- Then, we use the 4% rule (a widely accepted standard) which assumes you can safely withdraw 4% of your corpus annually without running out of money. Therefore, Required Corpus = Annual Future Expense / 0.04.
- Finally, we calculate the monthly SIP required today to reach that corpus, assuming your specified return on investment.
Tips for a wealthy retirement
- Start Early: The power of compounding works best over long periods. Delaying investments by even 5 years can double the required monthly SIP.
- Beat Inflation: Ensure your investment portfolio has a healthy mix of equity (like Mutual Funds) which historically beats inflation over the long term.
- Step-up SIP: You don't need to start with a huge amount. Start small and increase your SIP amount by 10% every year as your income grows.
Related Tools & Learn More
- SIP Calculator – Calculate how much to invest monthly
- PPF Calculator – Calculate PPF returns for retirement
- NPS Calculator – Plan your National Pension System
- Systems Approach to Wealth – Automate your retirement savings