Why Retirement Planning Is Crucial
Life expectancy in India is rising; people often live into their 80s. Healthcare costs are increasing at 10–15% per year. Without a plan, you may outlive your savings or depend on children. Retirement planning ensures you have enough to maintain your lifestyle, cover medical expenses, and meet goals like travel or supporting family. EPF and employer pension help, but they may not be enough, especially if you changed jobs frequently or had a low Basic salary. Start early to benefit from compounding; a 25-year-old saving ₹5,000/month can build far more than a 45-year-old saving ₹20,000/month.
Key Takeaways
- 25–30× annual expense: Rule of thumb for corpus. Adjust for inflation
- Start early: Compounding works best over 25–30 years
- Diversify: EPF, NPS, PPF, mutual funds. Don't rely on one product
- Factor inflation: 6% inflation doubles expenses in 12 years
- Use Retirement Planner: Get personalised monthly savings target
How Much Do You Need?
A common rule is 25–30 times your annual expenses at retirement. If you spend ₹10 lakh per year today, and retire in 25 years, with 6% inflation your expenses would be ~₹43 lakh per year. So you'd need 25× ₹43L = ₹10.75 crore. Alternatively, use 70% of your last drawn salary as target monthly expense; many people spend less in retirement (no commute, no work clothes, loans paid off). Use our Retirement Planner to input your numbers and get a precise target.
Factors to Consider
- Current age and retirement age: More years to save = smaller monthly SIP needed
- Inflation: Assume 6–7% for India. Underestimate and you'll fall short
- Current expenses: Base your retirement expense on today's lifestyle
- Healthcare: Budget 10–15% extra for medical. Critical illness can cost lakhs
- Existing corpus: EPF, NPS, PPF. Subtract from target to get gap
- Expected returns: Equity 10–12%, debt 6–8%, EPF 8%. Be realistic
- Life expectancy: Plan for 85–90 years. Corpus must last 25–30 years after 60
Example: Rough Calculation
📊 Age 35, retire at 60, current expense ₹8L/year, 6% inflation, 10% return
Retirement Planning Strategies
- Start early: Even ₹5,000/month at 25 beats ₹20,000 at 40 over 35 years
- Maximise EPF: Ensure high Basic; add VPF if you want more
- Add NPS: 80CCD(1B) ₹50K; employer contribution if available
- SIP in equity: For growth. Allocate 60–80% to equity till 45, then reduce
- Review annually: Update corpus, returns, expenses. Adjust SIP
- Emergency fund: Keep 6–12 months expense separate. Don't touch for retirement
Common Mistakes
- Ignoring inflation: ₹1 Cr today ≠ ₹1 Cr in 25 years. Plan in future value
- Starting late: 40+ and no corpus? You'll need to save 40–50% of income
- Only EPF: EPF may not be enough. Add NPS, PPF, SIP
- Withdrawing EPF on job change: Lose compounding. Transfer, don't withdraw
- No medical cover: Health insurance is critical. Don't rely on employer post-retirement
Using Our Retirement Planner
Our Retirement Planner takes your age, retirement age, current expenses, inflation, expected returns, and existing corpus. It tells you how much to save monthly and projects your corpus at retirement. Use it to set a target and track progress annually.
Disclaimer
Projections are indicative. Returns and inflation vary. Consult a financial advisor for a detailed plan.