How a retirement corpus is estimated
Retirement planning has two stages. First, work out what your current expenses will cost by the time you retire, since inflation compounds across the whole working period. Second, size a corpus large enough to fund those inflated expenses for the rest of your life.
A widely used starting point is the 25x rule: a corpus of roughly 25 times your first year of retirement expenses, drawn down at about 4% a year. It is a rule of thumb rather than a guarantee, and it assumes the corpus stays invested through retirement.
Worked example
Current household expenses of 6,00,000 a year, 25 years from retirement, assuming 6% inflation.
| Input | Value |
|---|
| Current annual expense | 6,00,000 |
| Years to retirement | 25 |
| Assumed inflation | 6% |
| First-year expense at retirement | 25,75,122 |
| Corpus needed (25x) | 6.44 crore |
The gap between 6,00,000 and 25,75,122 is inflation alone — no change in lifestyle. This is why retirement targets calculated against today's expenses come out roughly four times too small over a 25-year horizon.
How to use this calculator
- Enter your current annual expenses, excluding costs that will stop at retirement such as a home loan EMI.
- Enter your current age and intended retirement age.
- Set an inflation assumption, erring on the higher side.
- Read the corpus figure, then use a goal or SIP calculation to find the monthly investment it requires.
- Re-run every few years — income, expenses and plans all change.
Frequently asked questions
Is the 4% withdrawal rule reliable?
It is a well-known guideline derived from historical market data, not a law. Its safety depends on portfolio composition, returns in the early retirement years, and how long retirement lasts. Treat it as a starting estimate to refine, not a guarantee.
Should medical costs be handled separately?
It is generally sensible to. Healthcare inflation often outpaces general inflation, and costs rise with age. Many plans layer adequate health insurance on top of the corpus rather than expecting the corpus to absorb it.
What if I start planning late?
The required monthly contribution rises sharply, but starting late is far better than not starting. Options include working a few years longer, moderating the target lifestyle, and prioritising retirement over lower-priority goals.
Should the corpus stay invested after retirement?
The 25x figure assumes it does — the corpus must continue growing to fund withdrawals that themselves rise with inflation. A corpus held entirely in cash depletes considerably faster than the rule implies.
Do pensions and other income change the calculation?
Yes. Subtract any guaranteed income — pension, annuity, rental — from the expenses the corpus must cover. Only the remaining shortfall needs to be funded by the corpus.
This calculator is an educational tool. Results are estimates based on the inputs you provide and do not constitute financial advice. Verify figures with your bank, broker or a qualified advisor before acting on them.