Formula used
The model uses a finite annual annuity: corpus in today's rupees = annual spending × [1 - (1 + r)^(-N)] / r. Annual spending is current monthly expenses × 12 after the entered expense reduction; N is expected life age minus retirement age. The model approximates the return after inflation as r = max(post-retirement return - inflation, 1%), with rates expressed as decimals. This 1% floor is a calculation limit, not a guaranteed real return, and can understate the target when returns fail to beat inflation. The retirement-date target compounds today's corpus by inflation for the years remaining. Existing savings grow annually; SIP contributions are assumed at the beginning of each month.
Example calculation
With current age 30, retirement at 60, expected life age 85, ₹50,000 monthly expenses, a 20% expense reduction, 6% inflation and 8% post-retirement return, the model funds 25 retirement years at a 2% return-after-inflation approximation. It estimates ₹93.71 lakh in today's rupees, equivalent to ₹5.38 crore at retirement. With no existing corpus and a ₹10,000 monthly SIP growing at an assumed 12%, projected savings are ₹3.53 crore at retirement. The gap is ₹1.85 crore, requiring about ₹5,248 extra monthly SIP beyond the entered ₹10,000. These are constant-rate scenarios, not guaranteed outcomes.
How to use this calculator
- Enter current age, retirement age, and expected life age.
- Enter current monthly expenses and reduction post-retirement.
- Enter existing corpus and current monthly SIP.
- Review the retirement-date corpus target, projected savings and shortfall. The required SIP output is the extra monthly saving needed beyond your entered SIP.
Important assumptions
- The post-retirement expense reduction is your input assumption, not an automatic fall in household costs.
- Inflation is constant throughout the planning period.
- Returns are estimated — actual returns vary.
- Pension income, taxes, fees, one-time medical costs and market return fluctuations are not modelled.
- The annual return-after-inflation approximation is floored at 1%; it does not model zero or negative real returns.
- The finite annuity assumes annual spending at year-end and funding only through your entered expected life age.
Why retirement planning matters
The default horizon runs from retirement at 60 through age 85, a 25-year funding period. Expected life age is an input rather than a prediction; extending it increases the years of spending that the model must fund.
The power of starting early
At an assumed 12% annual return compounded monthly with deposits at the start of each month, ₹5,000 a month for 35 years projects to about ₹3.25 crore. Reaching the same mathematical target in 25 years requires about ₹17,114 a month. The comparison holds the return constant and excludes tax and fees; it does not predict actual investment performance.
Common retirement mistakes
Underestimating expenses, ignoring inflation, not diversifying, relying only on PF/NPS, and starting too late.