Retirement planning gets described as complicated. In fact it turns on four numbers, and understanding how they interact is most of the work.
The four numbers
- What you spend each month today.
- How many years until you stop earning.
- How many years the corpus then has to last.
- What you assume about inflation and returns across both periods.
Step one: today's expenses, inflated
Start with actual monthly spending, excluding investments and any EMI that will have ended by then. Grow that figure at your inflation assumption for the number of years until retirement. The result is often startling, and it should be — it is simply what the same lifestyle costs later.
Step two: the corpus
The corpus has to fund withdrawals that themselves keep rising with inflation, while the remaining balance continues to earn a return. The figure that decides how long it lasts is not the nominal return but the real return — the return after inflation.
Step three: what you already have
Count only what is genuinely earmarked for retirement: provident fund balances, existing retirement investments, and any SIP already running towards this goal. A property you live in is not a retirement asset unless you actually intend to sell or let it.
Step four: the gap
The difference between the corpus required and what existing arrangements are projected to produce is the gap. Converting that gap into a monthly investment is straightforward arithmetic — the retirement calculator on this site does it, and shows every assumption it used.
What the calculation cannot capture
- Healthcare costs, which have historically risen faster than general inflation.
- A career break, a change of plans, or an earlier retirement than expected.
- Sequence of returns — a poor few years immediately after retiring hurts far more than the same years later.
- Supporting dependants for longer than planned.
None of that is a reason to skip the calculation. It is a reason to redo it every few years, and to plan to an age comfortably beyond your expectation.