How much do you need to retire? Work backwards from the monthly figure

Retirement planning fails at the first step, where a large and abstract number arrives without explanation and people stop reading. Here is how the number is built.

Step one: your expenses at retirement

Take today’s monthly expenses — say ₹50,000 — and inflate them to your retirement date. At 6% inflation over 30 years, that is about ₹2.87 lakh a month. This is the figure most people never calculate, and it is why “₹1 crore is enough” persists.

Step two: what funds that expense

The corpus has to pay that inflating amount for the whole of retirement — commonly 25 years. Because the corpus stays invested, the maths uses the real return: the return above inflation. At a 7% post-retirement return against 6% inflation, that is roughly 1% real, and the corpus needed is large.

Step three: subtract what you already have

Existing savings, EPF and NPS all compound until you retire. Grow them at your pre-retirement return and subtract from the corpus. What remains is the gap.

Step four: turn the gap into a SIP

The gap becomes a monthly instalment at your expected pre-retirement return. This is the only number you have to act on, and it is usually far more manageable than the corpus figure suggested.

The three levers

Save more, retire later, or spend less in retirement. Delaying by five years usually does the most work, because it adds five years of compounding and removes five years of withdrawals at once.

Revisit it annually

Inflation, income and expenses all move. Re-run the retirement calculator once a year with real numbers, and step up the SIP to close whatever gap has opened. A plan checked once and never revisited is a wish.