## What percentage of my salary should go towards retirement?

This post answers a common question asked by investors regarding investing for retirement.

Posted on 10 Sep 2021

Author: Sayan Sircar

29 mins read

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This post answers a common question asked by investors regarding investing for retirement.

A common question for investors is the percentage of their monthly income they need to save for retirement. The in the US, a common thumb-rule is minimum 15% but that has a lot of assumptions that may not be applicable to Indian investors like retirement age, longevity, healthcare expenses and state pension.

If you have never used a goal-based investing calculator, which gives you the exact figure, this post will show you a quick way to calculate, starting with some simple assumptions. In the figure below, we have split the monthly post-tax income as:

pie title Income
"X:retirement" : 40
"Y:spending" : 50
"Z:other" : 10

**X**: amount to be saved for retirement (this is the unknown)**Y**: amount spent for monthly expenses (this is known)**Z**: amount to be saved for other goals and paid as EMI for home/car/personal loan/credit card (this is leftover from the income)

We need to calculate three numbers:

**N1**: Y/Income: this is the percentage of income spent today on monthly expenses. Suppose you earn 20 lakhs/year and spend ten lakhs/year, then this number is 50%. We have assumed this to be 50% for all the tables below. If yours is more than 50%, you need to save more per month for retirement.**N2**: How much you have saved for retirement, as a multiple of your current expenditure. So if you have saved 50 lakhs for retirement in PF, NPS, stocks and mutual funds, then this is 5x**N3**: We need one more figure, which is the amount to be spent in retirement to keep a similar lifestyle as a percentage of today’s expenses. So if you spend ten lakhs/year and think your post-retirement lifestyle will be similar, this is 100%. Post retirement expenses can be calculated as per this post.

How to read the tables:

- the rows show the corpus saved as a multiple of today’s expenditure, i.e.
**N2** - the columns show replacement income in retirement, i.e.
**N3** - the body of the table shows the percentage of income to be invested per month for retirement. The lower this number, the better it is. If it is zero, then you have already saved enough for retirement

You can use the table of contents below to jump to the age band you are interested in quickly.

The calculations in the tables below are not thumb rules. They are actual SIP figures for the current portfolio, expenses and income of the investor including an assumption of increasing the SIP amount every year. If you need a tailored result, please see

- How do you get the SIP amount for retirement?
- Use the online Goal-based Investing calculator for retirement planning

Assumptions for the model:

- 7% inflation both before and after retirement
- 40 years in retirement
- 5% increase in yearly investment until retirement
- 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

- Age-wise tables showing how much to save for retirement
- Understanding the table data
- What if the percentage figure is very high
- A note on having the prerequisites in place

This table shows that a 30 year old who has not saved anything (row 1), needs to start saving 67% of their monthly salary for retirement to have the same lifestyle as they are having today.

Retirement expenses > |
50 |
60 |
70 |
80 |
90 |
100 |
110 |
120 |
---|---|---|---|---|---|---|---|---|

0x | 34 | 40 | 47 | 54 | 60 | 67 |
74 | 81 |

2x | 30 | 36 | 43 | 50 | 57 | 63 | 70 | 77 |

4x | 26 | 33 | 39 | 46 | 53 | 59 | 66 | 73 |

6x | 22 | 29 | 36 | 42 | 49 | 56 | 62 | 69 |

8x | 18 | 25 | 32 | 38 | 45 | 52 | 59 | 65 |

10x | 14 | 21 | 28 | 35 | 41 | 48 | 55 | 61 |

12x | 11 | 17 | 24 | 31 | 37 | 44 | 51 | 58 |

14x | 7 | 14 | 20 | 27 | 34 | 40 | 47 | 54 |

16x | 3 | 10 | 16 | 23 | 30 | 37 | 43 | 50 |

18x | 0 | 6 | 13 | 19 | 26 | 33 | 39 | 46 |

20x | 0 | 2 | 9 | 15 | 22 | 29 | 36 | 42 |

22x | 0 | 0 | 5 | 12 | 18 | 25 | 32 | 39 |

24x | 0 | 0 | 1 | 8 | 15 | 21 | 28 | 35 |

26x | 0 | 0 | 0 | 4 | 11 | 17 | 24 | 31 |

28x | 0 | 0 | 0 | 0 | 7 | 14 | 20 | 27 |

30x | 0 | 0 | 0 | 0 | 3 | 10 | 17 | 23 |

32x | 0 | 0 | 0 | 0 | 0 | 6 | 13 | 19 |

34x | 0 | 0 | 0 | 0 | 0 | 2 | 9 | 16 |

36x | 0 | 0 | 0 | 0 | 0 | 0 | 5 | 12 |

38x | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 8 |

40x | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 4 |

This table shows that a 35 year old who has saved 10x their current yearly expenses (row 6) for retirement, needs to save 56% of their monthly salary for retirement to have the same lifestyle as they are having today.

Retirement expenses > |
50 |
60 |
70 |
80 |
90 |
100 |
110 |
120 |
---|---|---|---|---|---|---|---|---|

0x | 38 | 46 | 53 | 61 | 69 | 76 | 84 | 91 |

2x | 34 | 42 | 49 | 57 | 65 | 72 | 80 | 87 |

4x | 30 | 38 | 45 | 53 | 60 | 68 | 76 | 83 |

6x | 26 | 33 | 41 | 49 | 56 | 64 | 72 | 79 |

8x | 22 | 29 | 37 | 45 | 52 | 60 | 67 | 75 |

10x | 18 | 25 | 33 | 41 | 48 | 56 |
63 | 71 |

12x | 14 | 21 | 29 | 36 | 44 | 52 | 59 | 67 |

14x | 9 | 17 | 25 | 32 | 40 | 48 | 55 | 63 |

16x | 5 | 13 | 21 | 28 | 36 | 44 | 51 | 59 |

18x | 1 | 9 | 17 | 24 | 32 | 39 | 47 | 55 |

20x | 0 | 5 | 12 | 20 | 28 | 35 | 43 | 51 |

22x | 0 | 1 | 8 | 16 | 24 | 31 | 39 | 46 |

24x | 0 | 0 | 4 | 12 | 20 | 27 | 35 | 42 |

26x | 0 | 0 | 0 | 8 | 15 | 23 | 31 | 38 |

28x | 0 | 0 | 0 | 4 | 11 | 19 | 27 | 34 |

30x | 0 | 0 | 0 | 0 | 7 | 15 | 22 | 30 |

32x | 0 | 0 | 0 | 0 | 3 | 11 | 18 | 26 |

34x | 0 | 0 | 0 | 0 | 0 | 7 | 14 | 22 |

36x | 0 | 0 | 0 | 0 | 0 | 3 | 10 | 18 |

38x | 0 | 0 | 0 | 0 | 0 | 0 | 6 | 14 |

40x | 0 | 0 | 0 | 0 | 0 | 0 | 2 | 10 |

This table shows that a 40 year old who has saved 20x their current yearly expenses (row 11) for retirement, needs to save 44% of their monthly salary for retirement to have the same lifestyle as they are having today.

Retirement expenses > |
50 |
60 |
70 |
80 |
90 |
100 |
110 |
120 |
---|---|---|---|---|---|---|---|---|

0x | 44 | 53 | 62 | 70 | 79 | 88 | 97 | 106 |

2x | 40 | 48 | 57 | 66 | 75 | 84 | 92 | 101 |

4x | 35 | 44 | 53 | 62 | 70 | 79 | 88 | 97 |

6x | 31 | 39 | 48 | 57 | 66 | 75 | 83 | 92 |

8x | 26 | 35 | 44 | 53 | 61 | 70 | 79 | 88 |

10x | 22 | 31 | 39 | 48 | 57 | 66 | 75 | 83 |

12x | 17 | 26 | 35 | 44 | 53 | 61 | 70 | 79 |

14x | 13 | 22 | 30 | 39 | 48 | 57 | 66 | 75 |

16x | 8 | 17 | 26 | 35 | 44 | 52 | 61 | 70 |

18x | 4 | 13 | 22 | 30 | 39 | 48 | 57 | 66 |

20x | 0 | 8 | 17 | 26 | 35 | 44 |
52 | 61 |

22x | 0 | 4 | 13 | 22 | 30 | 39 | 48 | 57 |

24x | 0 | 0 | 8 | 17 | 26 | 35 | 43 | 52 |

26x | 0 | 0 | 4 | 13 | 21 | 30 | 39 | 48 |

28x | 0 | 0 | 0 | 8 | 17 | 26 | 35 | 43 |

30x | 0 | 0 | 0 | 4 | 13 | 21 | 30 | 39 |

32x | 0 | 0 | 0 | 0 | 8 | 17 | 26 | 34 |

34x | 0 | 0 | 0 | 0 | 4 | 12 | 21 | 30 |

36x | 0 | 0 | 0 | 0 | 0 | 8 | 17 | 26 |

38x | 0 | 0 | 0 | 0 | 0 | 4 | 12 | 21 |

40x | 0 | 0 | 0 | 0 | 0 | 0 | 8 | 17 |

This table shows that a 45 year old who has saved 24x their current yearly expenses (row 13) for retirement, needs to save 45% of their monthly salary for retirement to have the same lifestyle as they are having today.

Retirement expenses > |
50 |
60 |
70 |
80 |
90 |
100 |
110 |
120 |
---|---|---|---|---|---|---|---|---|

0x | 52 | 63 | 73 | 83 | 94 | 104 | 115 | 125 |

2x | 47 | 58 | 68 | 78 | 89 | 99 | 110 | 120 |

4x | 42 | 53 | 63 | 74 | 84 | 94 | 105 | 115 |

6x | 37 | 48 | 58 | 69 | 79 | 89 | 100 | 110 |

8x | 32 | 43 | 53 | 64 | 74 | 84 | 95 | 105 |

10x | 27 | 38 | 48 | 59 | 69 | 80 | 90 | 100 |

12x | 22 | 33 | 43 | 54 | 64 | 75 | 85 | 95 |

14x | 17 | 28 | 38 | 49 | 59 | 70 | 80 | 90 |

16x | 13 | 23 | 33 | 44 | 54 | 65 | 75 | 86 |

18x | 8 | 18 | 28 | 39 | 49 | 60 | 70 | 81 |

20x | 3 | 13 | 23 | 34 | 44 | 55 | 65 | 76 |

22x | 0 | 8 | 19 | 29 | 39 | 50 | 60 | 71 |

24x | 0 | 3 | 14 | 24 | 34 | 45 |
55 | 66 |

26x | 0 | 0 | 9 | 19 | 29 | 40 | 50 | 61 |

28x | 0 | 0 | 4 | 14 | 25 | 35 | 45 | 56 |

30x | 0 | 0 | 0 | 9 | 20 | 30 | 40 | 51 |

32x | 0 | 0 | 0 | 4 | 15 | 25 | 35 | 46 |

34x | 0 | 0 | 0 | 0 | 10 | 20 | 31 | 41 |

36x | 0 | 0 | 0 | 0 | 5 | 15 | 26 | 36 |

38x | 0 | 0 | 0 | 0 | 0 | 10 | 21 | 31 |

40x | 0 | 0 | 0 | 0 | 0 | 5 | 16 | 26 |

This table shows that a 50 year old who has saved 30x their current yearly expenses (row 16) for retirement, needs to save 42% of their monthly salary for retirement to have the same lifestyle as they are having today.

Retirement expenses > |
50 |
60 |
70 |
80 |
90 |
100 |
110 |
120 |
---|---|---|---|---|---|---|---|---|

0x | 65 | 77 | 90 | 103 | 116 | 129 | 142 | 155 |

2x | 59 | 72 | 85 | 98 | 110 | 123 | 136 | 149 |

4x | 53 | 66 | 79 | 92 | 105 | 118 | 130 | 143 |

6x | 47 | 60 | 73 | 86 | 99 | 112 | 125 | 138 |

8x | 41 | 54 | 67 | 80 | 93 | 106 | 119 | 132 |

10x | 36 | 48 | 61 | 74 | 87 | 100 | 113 | 126 |

12x | 30 | 43 | 56 | 69 | 81 | 94 | 107 | 120 |

14x | 24 | 37 | 50 | 63 | 76 | 89 | 101 | 114 |

16x | 18 | 31 | 44 | 57 | 70 | 83 | 96 | 109 |

18x | 12 | 25 | 38 | 51 | 64 | 77 | 90 | 103 |

20x | 7 | 19 | 32 | 45 | 58 | 71 | 84 | 97 |

22x | 1 | 14 | 27 | 40 | 52 | 65 | 78 | 91 |

24x | 0 | 8 | 21 | 34 | 47 | 60 | 72 | 85 |

26x | 0 | 2 | 15 | 28 | 41 | 54 | 67 | 80 |

28x | 0 | 0 | 9 | 22 | 35 | 48 | 61 | 74 |

30x | 0 | 0 | 3 | 16 | 29 | 42 |
55 | 68 |

32x | 0 | 0 | 0 | 10 | 23 | 36 | 49 | 62 |

34x | 0 | 0 | 0 | 5 | 18 | 31 | 43 | 56 |

36x | 0 | 0 | 0 | 0 | 12 | 25 | 38 | 51 |

38x | 0 | 0 | 0 | 0 | 6 | 19 | 32 | 45 |

40x | 0 | 0 | 0 | 0 | 0 | 13 | 26 | 39 |

This table shows that a 55 year old who has saved 40x their current yearly expenses (row 16) for retirement, needs to save 22% of their monthly salary for retirement to have the same lifestyle as they are having today.

**Note**: The saved corpus starts at 10x of current expenses.

Retirement expenses > |
50 |
60 |
70 |
80 |
90 |
100 |
110 |
120 |
---|---|---|---|---|---|---|---|---|

10x | 51 | 69 | 88 | 106 | 124 | 143 | 161 | 179 |

12x | 43 | 61 | 80 | 98 | 116 | 135 | 153 | 171 |

14x | 35 | 53 | 72 | 90 | 108 | 127 | 145 | 163 |

16x | 27 | 45 | 64 | 82 | 100 | 118 | 137 | 155 |

18x | 19 | 37 | 56 | 74 | 92 | 110 | 129 | 147 |

20x | 11 | 29 | 47 | 66 | 84 | 102 | 121 | 139 |

22x | 3 | 21 | 39 | 58 | 76 | 94 | 113 | 131 |

24x | 0 | 13 | 31 | 50 | 68 | 86 | 105 | 123 |

26x | 0 | 5 | 23 | 42 | 60 | 78 | 96 | 115 |

28x | 0 | 0 | 15 | 34 | 52 | 70 | 88 | 107 |

30x | 0 | 0 | 7 | 25 | 44 | 62 | 80 | 99 |

32x | 0 | 0 | 0 | 17 | 36 | 54 | 72 | 91 |

34x | 0 | 0 | 0 | 9 | 28 | 46 | 64 | 83 |

36x | 0 | 0 | 0 | 1 | 20 | 38 | 56 | 74 |

38x | 0 | 0 | 0 | 0 | 12 | 30 | 48 | 66 |

40x | 0 | 0 | 0 | 0 | 3 | 22 |
40 | 58 |

42x | 0 | 0 | 0 | 0 | 0 | 14 | 32 | 50 |

44x | 0 | 0 | 0 | 0 | 0 | 6 | 24 | 42 |

46x | 0 | 0 | 0 | 0 | 0 | 0 | 16 | 34 |

48x | 0 | 0 | 0 | 0 | 0 | 0 | 8 | 26 |

50x | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 18 |

We will take the following example:

- Age is 40 years, 18 years to retirement
- The investor has saved 20x of their current expenses as retirement corpus
- They expect that retirement expenses will be the same, i.e. 100% of the expenses today (the model adjusts this for inflation of 18 years)

The table under the **“Age is 40y, time left until retirement is 18y”** section shows that the investor must be investing 44% of their monthly income for retirement. If you have already saved more money, say 30x of their current expenses, this requirement drops to just 21% of the monthly salary.

In the assumptions above, we have assumed that 50% is the total household expenses. Hence any investment figure above 50% in the tables 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

Any figure in the tables higher than 100% means that saving for retirement, as per current figures, will lead to a much lower corpus than needed.

At all times ensure that you have the following in place

- an emergency fund with 6-12 months of expenses
- a term insurance policy (unless you are retired with no income)
- a health insurance policy (separate from the company provided one if any) for 10-15 lakhs as a base policy with a 50-100 lakhs super-top up
- a personal accident insurance coverage to safeguard against accidents where you do not die but cannot earn
- no high-interest debt like credit card or personal loans

Once you start investing,

- perform yearly review and rebalancing as per your glide-path
- never interrupt compounding by making these avoidable mistakes

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This post titled **What percentage of my salary should go towards retirement?** first appeared on 10 Sep 2021 at https://arthgyaan.com