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How Much Corpus Does One Need for Retirement?

Retirement is one of the most important element of a systematic financial planning. Know how much corpus do you require to achieve your post-work life for a cash rich retirement. 

  • 2,811 Views | Updated on: Jan 15, 2024

Retirement planning is an important part of financial planning for everyone. Good financial planning, money choices, and investing in retirement plans can help you live a peaceful and worry-free retired life. However, the process can get a little intimidating and stressful at the beginning and all you have to do is be patient during the bad times.

The question, how much retirement corpus does one need for retirement, cannot be simply answered like yes or no. It is a much deeper question and the answer can be manifold to it. What you need to understand is the kind of retirement corpus you are looking at, your responsibilities, your lifestyle and so many other things. Just like a term plan, your retirement corpus would also depend on your requirements so make sure you have those listed first.

All things considered, this might become a little overwhelming for many, and therefore, we have put down a simple understanding of these aspects to assist you in effectively planning the same.

Annual Retirement Fund

  • Assuming you begin putting 9% of your salary towards your retirement at the age of 60, your corpus will be adequate enough to support you until you reach the age of 90.
  • Likewise, putting up 18.4% of your salary for retirement will allow you to quit at 55 and live well until you are 90.
  • By putting aside 34.1% of your salary for retirement, you’ll be able to retire early at the age of 50 with enough money to last until you’re 90.

4% Withdrawal Retirement Rule

It is critical to have a complete understanding of the aim, when making a long term financial investment. Investors who take inflation into account while planning for retirement find it much easier to fulfil their financial goals. As per tax and investment gurus, the easiest route to determine post-retirement funding requirements is to make a list of monthly expenses and compute the amount at the current rate. Then, using 7% inflation, compute the present total growing at 7% for the period in which they will be retiring. According to tax experts, the 4% withdrawal rule applies to the net amount required at the time of retirement.

Retirement Calculator

A retirement calculator may be useful if you’re still having problems settling on a corpus for your retirement savings. An online retirement calculator demands precise information regarding current age, desired retirement age, life expectancy, etc., to predict the costs and the length of investments. Monthly costs including energy bills, housing rent, driver/maid/cook wages, maintenance, petrol, leisure, medications, marital and family status, city, area of residence, and any information on current investments are also required by the calculator. It predicts the rise and fall in these costs in the future with a roughly estimated retirement fund amount.

To summarise, the anticipated retirement corpus or savings you will require for a pleasant and serene retired life is highly dependent on your present employment, lifestyle, and future retirement goals. Therefore, careful planning, utilization of available tools, and proper research are crucial to come up with a figure that best fits your needs!

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors