How to Calculate Your Retirement Corpus
Planning for retirement requires estimating future expenses, accounting for inflation, and determining how much corpus you need to sustain your lifestyle.
Retirement Corpus Formula
Required Corpus = Annual Expense × ((1+i)^y) × ((1 - (1+r')^(-n)) / r')
Where:
- Annual Expense = Current annual living expenses
- i = Expected inflation rate
- y = Years until retirement
- r' = Real return rate (investment return - inflation)
- n = Years in retirement (life expectancy - retirement age)
Step-by-Step:
- 1
Estimate current expenses
Calculate your current annual living cost.
- 2
Adjust for inflation
Project expenses at retirement using inflation rate.
- 3
Estimate retirement duration
Life expectancy minus retirement age.
- 4
Calculate required corpus
Use the present value of annuity formula at retirement date.
Worked Examples:
Retire at 60, current age 30
Monthly Expenses: ₹50,000Inflation: 6%Return Rate: 10%Life Expectancy: 85
Result: ≈ ₹5.7 Cr corpus needed
Monthly expense at 60 = ₹2.87L (after 30 years of 6% inflation). Need corpus to last 25 years.