how do I calculate a conservative retirement corpus for after 35 years?

POSTED BY anon smith ON August 18, 2012 10:59 am COMMENTS (16)


I just started earning abroad (younger than 24 years) and I am beginning to get my financial planning done. I am doing the following to estimate a corpus for my retirement. I am entirely new to investing and following is a starting theory:

I plan to return to India in 2028, at an estimated yearly expenditure beginning at 6 lpa. I assume my post tax income then would be atleast 15 lpa (My posting is abroad, but the same starting position in India gets about 12 lpa, and I assume 2-3 promotions easily in 16 years for a conservative 15 lpa salary estimate later)

I compound my yearly expenses by 4% every year which will amount to  14 lpa expenses, when I am almost 60. Is it sufficient if I have 15 times my yearly expenditure during retirement? I think I can live off FD interests (assuming a 9% return still holds) from that corpus. My problem is that it looks very less (about 1.9 crores), which is the typical retirement corpus for people (in slightly high earning jobs) retiring now!. How can I estimate a ball-park figure for after 30-35 years? 


16 replies on this article “how do I calculate a conservative retirement corpus for after 35 years?”

  1. anon smith says:

    Thanks for the detailed reply and the tips. Regarding investing in the US, I currently know only about FDs and SIPs.

    I mostly will not have or spend time looking at how stocks are doing, timing the market and other involved things. I don’t know about vehicles similar to SIP in the US, which give 12-15% CAGR returns without the hassles I mentioned above so I am not sure if I want to invest there.

    Sure I’ll do that. Thanks.

    Digressing a little bit – on a side note, I’m really strong willed to return to India once I have kids and when they reach middle school. We have the best coaching centers for high quality UG education in the iits/abroad, etc. in engineering and similarly in medicine. This was the reason for my success and I want to pass it on! You can get almost anything available in the US in most metropolitan areas here, including the lifestyle (maybe even a better one due to availability of domestic help) so there’s not much incentive to stay in the US for long…my strategy is to make enough which can be grown by SIPs and FDs for a big retirement corpus and maybe some extra luxuries and come running back to India ASAP.

    1. Ramesh says:

      Do not apply Indian context while living in US. eg. 10-15% CAGR in an inflation environment of 10%, is same as 7-8% in an inflation of 3-4%.

      Read things about investing in US.

      Indexing is a big way in US, courtesy vanguard funds. You can check their site (probably) for more information.

      Regarding your life’s philosophy, I would like to just say, that your current thinking may change quite a bit after 15-20 years. Moreover, your children after being in US for 10-12 years, would probably not like to live in India. The universities in US are among the best, be it engineering or medical, besides other things.

      In my opinion, you should do what is best for a US based person, not what is best for an India-based one.

    2. Dear Anon, I’m agree what dear Ramesh had told you above.

      Please think over it.



  2. anon smith says:

    (continuing the above thread) so can anyone with experience let me know if my salary “inflation” trick looks too unreasonable…how long do your salaries remain constant?

    1. Dear Anon, my take – It does not matter what calculator you used but for example say 5 Crore Rs. is the target amount based upon your current data & assumptions. So your current Goal for Retirement is to accumulate 5C Rs. in next 35Y. Now how much to invest on mly basis to reach this figure of 5C in next 35Y should be your next question? Calculate this mly figure & start investing.

      After 3-4 years. revisit the 5C figure based upon your the then your data & assumptions & make suitable change in your retirement investing.



  3. anon smith says:

    Sure I see your point now 🙂

    Thanks for the tips. I have all of that done, but I am not sure how to predict my salary over the years. In my initial spreadsheet, it(salary) was kept constant, but I am falling a little short of the corpus goal. I am able to meet all goals and more if I keep inflating my salary by 2-3% each year. I know this is like “cheating”..but I want to believe that companies also keep inflation in mind while paying out salaries.

  4. Bhushan says:

    Good to see that you have thought about retirement so early and are looking at saving for the same. Half of your job is done. Now the next big thing to START saving. Right now it doesn’t matter where you save. Just start with any of the various long term saving plans like Equity, MF, PPF (or 401K in USA). Prepare a simple spreadsheet listing income, expense, saving, returns from saving, etc. Porject these based on inflation and expected increment in salary. You can see how much salary you will have after X years and also the annual expense after so many years. Reviewing this regularly will help you in arriving at right amount for retirement. Few more points to note:
    1 – Try to invest in USA (primarily) and some in India. You never know, you may retire and settle in USA.
    2 – Consider wedding expenses, children’s expenses etc. You will have huge expense on House and also car. (USA-Returnees cannot live without a car!)
    3 – Do not try for obscene returns from investment. It will only make you invest with unreliable people.
    4 – Do not spend too much. definitely not by taking loan.
    5 – While spending or investing, you should always keep in mind that you do NOT have job security. Even government jobs are not safe anymore.

  5. anon smith says:

    Also I made no assumptions that my salary would increase ever after 16 years! Can I assume that it’ll increase by atleast 3% to handle inflation (given that my employer is among the top 10 among “the world’s best companies to work for”?) Otherwise I am finding it difficult to meet a very safe corpus, without sacrificing on other things.

  6. anon smith says:

    I also wonder why does it have to be so involved in calculating a retirement corpus. Wouldn’t it be sufficient to just buy a house such that the rent balances the yearly/monthly expenses?

    If a person wants to retire in 2012: with yearly expenses of 4-5L and has atleast 50-60L in hand, I think that should be sufficient to buy a house and give it for rent to cover the expenses right?

    1. Dear Anon, you mean to say, a house costing 50L Rs. ‘ll earn you a rent of 5L Rs. yly or around 40K Rs. mly? If such house is available, I’m ready to purchase right away. 🙂 🙂

      Please think again for the nos. posted by you.



  7. anon smith says:

    FD interest rates now for senior citizens are around 10%, so my theory is that if I manage to get about 21-25 times the yearly expenditure after 35 years, I can always have a growing and safe amount.

    1. Dear anon, you are not counting 2 things. The interest rates ‘ll not remain so for such long periods. What about the impact of income tax & inflation on your earning?



  8. anon smith says:

    @Shashank Kashettiwar: You have me intrigued about this steady-state-view theory, any references? thanks for the insightful and detailed reply.

    In your point 3, if the yearly expenses are 40L p.a, 8% of 50L is just 4L? Did you mean to say a corpus of 500L?

    @Ashal Jauhari: Thanks for that pointer. I’ll definitely do that.

  9. Dear Anon, Good to see that you are serious enough from day one for your retirement. Regarding to pin point a ball park figure, please use different online retirement calculators & arrive at a consensus figure. This figure ‘ll be your initial target. Recheck this target amount every 3-4 years to adjust according to your living standard at that time.



  10. shashank kashettiwar says:

    Dear Anon,
    You need to know following things to calculate retirement corpus required.
    First you have to fix the framework of assumptions. That is values of inflation to be considered, returns on debt-equity and other forms of investments to be considered and lastly how much monthly money you require for comfortable retirement. This set of assumptions is the most important. Instead of making any wild guesses regarding the values of these 3 factors in future it is my advice to take a ‘steady- state -view’ of the things. That is assume these values to continue to be same and connected with each other in the same way they are today. ( More on this ‘steady- state- view’ of things and why one’s planning can be built around it safely, we shall discuss later).

    Now let’s do some number crunching-

    1. Consider that you are retiring today- your house/s are debt free, kids have been educated and married off and you have enjoyed whatever luxuries of life you wanted to enjoy-How much money you will require if you retire today?. A good idea you will have if you consider your parent’s monthly expenditure today and adjust it for the lifestyle you would wish to have if you retire today. Say a range of 30,000-35,000/- p.m. sounds good enough?
    2. But this much money which is sufficient today will have to be increased because of inflation when you want to retire 35 years down the line.Past long term inflation values are @6-7%. Lets consider it to reach @7% in future—I’m just adding a margin of safety to consider higher expenses–by the time you retire. With this rate the prices/expenses would grow to @ 10 times today’s figures i.e. 3-3.5L per month or @ 40L per annum.( 10 yr-2 times, 20 yr-4times, 30 yr-8 times, 35 yr-@10 times from today )
    3. Now if we taken a steady state view of things then for a senior citizen it is very much possible to achieve a post tax rate of @8% on his investment portfolio. A corpus of 4o-45 lacs fetching a portfolio return of @8% will be required. Let’s be further conservative and increase this figure to 50 lacs. Now this 4 L return on this 50L is sufficient for his first year but definitely next year and in the years following more money will be required because of inflation. So what should we do? Lets add a 100% buffer to this 50 L. So now we will say that 1 cr of corpus is required for a conservative returns producing portfolio today.(If this available figure is 3 times or 4 times then what happens we will talk later)
    4.Generally life expectancy of a person is also one of the most important factor to be considered in retirement planning calculations. Also it is to be considered whether you want
    the retirement corpus to be consumed up , kept at same level, keep on increasing slowly/quickly by end of your life expectancy i.e. what kind of legacy you want to leave behind.(more on this later; just remember one thumb rule- the twice figure will last for a life expectancy of 25 yrs i.e. living upto age 85, thrice will maitain the corpus, four times will leave legacy even if you live for @100 yrs, five times- 100 and beyond living + strong legacy)
    So now adjust all your figures accordingly.
    Now what’s your idea, will you be able to reach what level? (more on this later)


  11. Ramesh says:

    Recheck with inflation figures of 6-7% (presently they are +10).

    Also, consider debt return to be below the level of inflation. So, if you are assuming 9% FD return, consider inflation to be above that.

    Work with +(3-4)% returns of long term equity (that is, above inflation 3-4%) and for debt -(2-3%).

    Read up a lot.

    also consider, you still would have another 30-40% years post-retirement (add your wife’s age too).

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