This post aims to provide a call to action in case you have not set your retirement goals and taken the necessary action.
As a follow-up to this post on the minimum investment needed for retirement, we will now calculate how much corpus you should have accumulated at different ages.
Our metric will be the corpus saved in mutual funds, provident funds (PF, PPF, VPF), NPS and other assets as a multiple of current monthly expenses. In addition, we will assume that the current lifestyle, post inflation adjustment, will continue in retirement. We will see how the age of the investor and current expenses impact the minimum corpus you need to have accumulated.
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Assumptions for the model
There are multiple assumptions in a calculation like this. It would help if you kept in mind that the calculations shown below will be valid only as per the assumptions made below:
Risk profile is moderate (60:40 equity and debt allocation for goals > 15 years away: see this for details)
11% and 3% as long term returns (post-tax) of equity and debt respectively
Minimum corpus table
The table shows the current expenses as a percentage of annual post-tax income in the columns. The rows show the current age of the investor.
For example, if you are 35 years old and spending 50% of your 20 lakhs annual income, you should have saved 13x of your yearly expenses as retirement corpus by now. So in this example, the retirement corpus you should have saved by now will be ā¹1.3 crores (13 * 50% * 20).
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What if the corpus figure is very high
In the assumptions above, we have assumed that you will maintain current lifestyle expenses in retirement. Any corpus figure in the tables that is very high indicates
current investments are too less
current expenses are too high
To remedy you need to do some introspection as to what needs to be done
reduce discretionary expenses like entertainment and travel
EMIs on household goods and paying too much for a car loan
high EMI on home loan
Suppose the lifestyle in retirement will be a lot less expensive than today, for example, by shifting to a low cost of living location. In that case, the target corpus will be a lot less.
The calculations in the table are not thumb rules. They are actual corpus figures for the current portfolio, expenses and income of the investor, including increasing the SIP amount every year. If you need a tailored result, please see
This post also shows why it is crucial to review your progress towards your goal continuously. This yearly review process will require you to repeat the retirement? goal planning process to check if you are on track. In addition, you will need to alter the SIP amount based on the progress you have made. If you have not started investing yet, please do so immediately since the SIP amount goes up very quickly if you delay.
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2. Use our goal-based investing template to prepare a financial plan for yourself OR use this quick and fastonline calculator to find out the SIP amount and asset allocation for your goals.
Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.
This post titled Goal-based investing will show you how much you should have saved at 30,40,50 and retirement first appeared on 13 Sep 2021 at https://arthgyaan.com
