How To Calculate Retirement Corpus?

Is your retirement planning on track? When you work hard all your life trying to meet your financial goals, you deserve a comfortable retirement, free of any financial worries. And to achieve that, you need to build a large corpus to sustain your current lifestyle.

However, before starting your financial planning, you need to figure out the exact amount you'll need for a secure retirement. Wondering how to calculate your retirement corpus and reach your goal? Fret not!

Here's a step-by-step guide to help you calculate your retirement corpus.

How to calculate corpus for retirement?

1. Determine the number of years you have till retirement

Before you start working out your post-retirement finances, it is important to determine a timeline. The time you have left till retirement will largely impact your investment decisions. Depending on whether you want to retire at the regular age of 60 or earlier, you can choose suitable investment instruments and calculate retirement corpus in India.

2. Estimate your post-retirement expenses

To know how to calculate retirement corpus, evaluate your current monthly expenses. Apart from the regular expenses like rent, utilities, and groceries, you're more likely to incur higher medical expenses due to old age. Besides, it's always a good idea to prepare yourself for any unexpected expenditures.

Once you have estimated the annual expenses to support you through the golden years, don't forget to account for inflation. This will help you get a better estimate of your post-retirement expenses.

3. Determine your investment options and expected returns

The post-retirement period is marked by low-income levels. Even if you have a stable source of income in the form of a pension or rent, you need to plan your finances with suitable investment avenues based on your financial goals and risk appetite.

However, when investing your hard-earned money in mutual funds, FDs, or direct equities, don't forget to make the right projections depending on their past performance. Focus on the right mix of securities – invest your funds in varying asset classes like bonds, securities, cash equities, and more to maximise your returns.

• SIP- SIP is a systematic approach to mutual fund investments that lets you accumulate funds over time. Since it does not carry any minimum requirements and facilitates convenient wealth generation, it is an excellent way to build your retirement corpus
• PPF- PPF is an attractive long-term investment plan where you can earn handsome returns at low-risk
• Mutual Funds- Unlock the power of compounding by investing in mutual funds. You can start with equity funds for higher returns and gradually shift to debt MFs as you get close to retirement.

Including diverse securities in your portfolio will ensure that you have enough funds to fall back on, even if any of your investments don't yield expected returns. Now, determine the expected rate of returns on these investments and enter them into the retirement corpus calculator with inflation to get a near-accurate idea of your corpus.

4. Consider inflation

Your calculations using a retirement corpus calculator will not offer a fair idea of your financial needs unless you consider inflation-adjusted returns. The value of your money decreases over time. Not to mention, inflation leads to an increased cost of living. So, the true value of the retirement corpus you build today is going to depreciate by the time you hit retirement.

In other words, inflation will cause a significant decline in your investment returns. For instance, suppose your expected rate of returns (post-retirement) on investment is 13%, and the inflation rate is 6%, then your inflation-adjusted returns are calculated as-

[(1 + rate of return)/ (1 + inflation rate)] - 1

= [(1+13%)/ (1+6%)] – 1 = 6.6%

Here, your inflation-adjusted returns will be 6.6%. Therefore, you must take a futuristic approach and eliminate the effects of inflation while calculating your retirement corpus. For this, you can use a retirement corpus calculator with inflation to get accurate results.

5. Calculate your retirement corpus

Once you have determined your post-retirement financial needs and planned your investments, you can calculate your retirement amount using the present value formula.

Present Value = Future Value x (1+r) ⁿ, where r = rate of returns, n = number of years

Let's consider an example. Suppose a 35-year-old individual with a life expectancy of 80 years has annual expenses of 12 lakhs a year. Now for retirement corpus calculation, we need to calculate the expected post-retirement expenses.

Considering the inflation adjusted returns of 6.6%, the desired retirement corpus will be around Rs. 10.30 crores for a comfortable retirement.

Alternatively, you can also use a retirement corpus calculator available online to figure out the value of your retirement corpus and plan your investments accordingly.

Corpus calculator for retirement

A retirement corpus calculator India is a convenient online tool that helps you in estimating your financial needs after retirement. To lead a financially comfortable and stress-free life after retirement, you must start planning your expenses and investments as early as possible.

Because the earlier you begin, the more time you'll have to sort your investment options and maximise your returns. In this respect, the corpus calculator for retirement will let you figure out how much wealth you need to generate before retiring.

Take your first step towards retirement planning!

To calculate retirement corpus, make sure to have a realistic idea of your expenses, consider inflation, and diversify your portfolio for greater returns. With the right financial planning, you can truly make the most of this golden period.

Take a step towards investment planning with Tata Capital's Moneyfy app. Review and compare different investment products, invest in mutual funds, SIPs, and more, depending on your financial goals and risk tolerance.

Now that you know how to calculate retirement corpus you can use a retirement corpus calculator India online and figure out the exact funds you need for a stress-free retirement.

To choose from the best investment avenues, download the Moneyfy app today!