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What percentage of my salary should go towards retirement?

10 Sep 2021 - Contact Sayan Sircar

Tags: Retirement ;  Set Goals

29 mins read

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

Table of Contents

• Age-wise tables showing how much to save for retirement
  • Age is 30y, time left until retirement is 28y
  • Age is 35y, time left until retirement is 23y
  • Age is 40y, time left until retirement is 18y
  • Age is 45y, time left until retirement is 13y
  • Age is 50y, time left until retirement is 8y
  • Age is 55y, time left until retirement is 3y
• Understanding the table data
• What if the percentage figure is very high
• A note on having the prerequisites in place

Age-wise tables showing how much to save for retirement

Age is 30y, time left until retirement is 28y

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

Age is 35y, time left until retirement is 23y

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

Age is 40y, time left until retirement is 18y

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

Age is 45y, time left until retirement is 13y

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

Age is 50y, time left until retirement is 8y

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

Age is 55y, time left until retirement is 3y

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

Understanding the table data

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.

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What if the percentage figure is very high

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.

A note on having the prerequisites in place

At all times ensure that you have the following in place

• an emergency fund with 6-12 months of expenses
• a sinking fund for insurance payments (health, car) and recurring known expenses (building maintenance, holiday travel etc.)
• a term insurance policy as long as you have 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
• 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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