Retirement planning is the process of setting financial goals for your post-work life and taking steps to achieve them. It involves calculating how much money you'll need (your corpus) and creating a disciplined investment plan (like a SIP) to accumulate that amount.
Our calculator considers several key factors:
- Inflation: It calculates how much your current expenses will increase by the time you retire.
- Investment Growth: It uses your expected returns to project how your money will grow both before and after retirement.
- Life Expectancy: It ensures your calculated corpus is large enough to last throughout your expected lifespan after you stop working.
The Calculation Steps
The process involves a few key calculations:
- Future Value of Expenses: First, we calculate the future value of your current monthly expenses using the inflation rate.
- Corpus Calculation: Next, we determine the total lump sum (corpus) required at retirement. This amount needs to be large enough to allow you to withdraw your inflation-adjusted monthly expenses for the rest of your life, while the remaining corpus continues to generate returns.
- Required SIP: Finally, we calculate the monthly investment (SIP) needed to reach your target corpus, based on your investment timeline and expected pre-retirement returns.