For Rs 1 lakh monthly income post-retirement, build up this much corpus before you turn 60

To secure a monthly income of Rs 1 lakh after retirement, it’s crucial to build a substantial corpus before reaching the age of 60. Although committing to a monthly savings plan is commendable, it may not be adequate to maintain a financially independent lifestyle.

Therefore, the initial and pivotal step is to determine the time remaining until retirement and your expected post-retirement lifespan, as it can help you to develop a more effective and tailored retirement strategy.

However, many of us have rough notions about retirement planning, but vague ideas won’t suffice. You need to first take into account inflation if you are to fulfil your dream of retiring early. This is important as neglecting inflation can lead to a significant financial shortfall.

Consider this illustration: If you currently spend Rs 12 lakh annually at age 50, to maintain the same standard of living after 10 years, you would need nearly Rs 24 lakh annually, assuming a 7 percent inflation rate. It’s essential to recognise that inflation erodes the purchasing power of money. This is why your grandparents might be astonished by the current prices of everyday items like vegetables and milk. Like many, they may have assumed that they could continue purchasing the same quantity of goods and services without realising that their money hasn’t kept pace with the rising cost of living. Therefore, it’s imperative not to underestimate the impact of inflation when calculating your retirement corpus.

The next vital step is to initiate your retirement planning today. Delaying this crucial step only intensifies the need for aggressive savings. For instance, if you’re 25 and aspire to have a monthly post-retirement income of Rs 1 lakh at age 60, you would need to save Rs 28,912 per month for 35 years. Conversely, if you’re 40, for achieving the same goal you would require monthly savings of Rs 78,425 up to the age of 60. If you are 50 the monthly saving requirement will be Rs 1.88 lakh.

Now, let’s delve into the calculations. When determining your required retirement corpus, consider various factors, including your current monthly expenditures, inflation-adjusted to the start of retirement, your anticipated life expectancy, expected inflation during retirement, and projected returns on investments during and post-retirement.

To address the inflation factor, it’s advisable to break down your current expenses and then project these expenses into a post-retirement scenario, adjusting them to account for inflation. This comprehensive approach helps you arrive at a more accurate estimate of your retirement corpus.

Importantly, you need to consider the value of your existing investments like a property which can fetch you rent in future. While calculating the retirement corpus, consider the various income streams that can contribute to cash flow post-retirement.

Starting your retirement savings journey early holds distinct advantages. It alleviates the pressure of last-minute financial sprints and provides your money with more time to grow. The power of compounding can work wonders, exponentially multiplying your savings over time. For example, if you commence saving Rs 4,250 per month at age 30, you could accumulate approximately Rs 1.31 crore at an assumed rate of 12%. In contrast, waiting until a later age to begin savings can significantly diminish your potential corpus. Starting early allows your investments more time to flourish and grow, ultimately securing a more comfortable retirement.

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