Start With Your Salary and Work Backwards
Retirement planning begins with your current salary. How much you save, how you invest, and how you scale contributions with salary growth determine whether you'll have enough at 60. This guide walks you through a step-by-step approach: calculate savings capacity, estimate required corpus, allocate across EPF, NPS, and SIP, and increase contributions with raises. Use our Retirement Planner to run your numbers.
Key Takeaways
- Save 20%+ of take-home: Start with 20%, scale to 30–40% as salary grows
- 50–30–20 rule: 50% needs, 30% wants, 20% savings. Adjust for retirement
- EPF is baseline: Mandatory. Add NPS and SIP for extra corpus
- Step-up with salary: Increase SIP/NPS by 10% every year or with each raise
- Use Retirement Planner: Enter salary, age, expense. Get required SIP and corpus
Step 1: Calculate Your Savings Capacity
Take your monthly in-hand salary and subtract essential expenses: rent/EMI, utilities, groceries, loan EMIs, insurance, children's education. What's left is discretionary. Allocate at least 20% to retirement. If you earn ₹80,000 in-hand and spend ₹50,000 on essentials, you have ₹30,000 discretionary. Aim to save ₹16,000–20,000 (20–25%) for retirement. Even ₹10,000/month compounds into crores over 25 years.
Step 2: Estimate Required Retirement Corpus
Rule of thumb: 25× annual expense (at retirement). If you'll need ₹1 lakh/month (₹12L/year) in today's rupees, plan for ₹3–4 lakh/month in 25 years (6% inflation). Corpus = monthly need × 12 × 25 (or use 4% withdrawal rule). Example: ₹4L/month = ₹4.8 crore annual need. Corpus ≈ ₹1.2 crore (4% withdrawal) to ₹2 crore+ (conservative). Use Retirement Planner for accurate numbers with inflation and return assumptions.
Step 3: Allocate Across Instruments
- EPF: Already deducted. Employer matches. Don't reduce. VPF if you want more fixed income.
- NPS: Extra ₹50K 80CCD(1B). Start with ₹4,000/month. Market-linked, tax benefit.
- SIP (equity): For long-term (10+ years). Start with 10–15% of savings. Scale with salary.
- Ratio: EPF (fixed) + NPS (market) + SIP (equity). Younger = more equity; older = more debt.
Step 4: Increase Contributions With Salary Growth
When you get a raise, allocate 50% of the increment to retirement. If your salary goes from ₹80K to ₹88K (10% hike), add ₹4,000 to SIP or NPS. This step-up approach builds corpus without feeling a pinch. Set a reminder at the start of each financial year to review and increase contributions. A flat ₹10,000 SIP for 25 years gives one result; a step-up SIP (10% annual increase) gives significantly more.
Example: ₹60,000 In-Hand, Age 30
📊 Illustrative allocation
Step 5: Review Annually
- Update salary and expense: Income and spending change. Re-run Retirement Planner.
- Adjust return assumption: Past returns don't guarantee future. Use 10–12% for equity, 7–8% for EPF/NPS.
- Rebalance if needed: Too much equity near retirement? Shift to debt. Review every 2–3 years.
Use Our Retirement Planner
Enter age, retirement age, current expense, expected return, inflation. Get required corpus and monthly SIP. Adjust salary and savings to see impact.
Disclaimer
Returns and inflation are assumptions. Past performance doesn't guarantee future results. Consult a financial advisor for your situation.