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What should be my retirement corpus?

Dhirendra Kumar shares insights into how to calculate the corpus required for a comfortable retirement

How can I calculate the amount required for my retirement?

If you are retiring at the age of 60, a very conservative estimate would be to have a corpus that is equivalent to 25 times of the initial amount required per annum to meet your expenses after retirement.

For example, if you need Rs five lakh per annum for consumption in the first year on retirement, then the corpus required would be Rs 1.25 crore. Thereafter, make sure that your annual withdrawal rate does not exceed four per cent so that you can avoid the risk of outliving your corpus. Besides, such a conservative withdrawal rate will ensure that you can meet the requirements of rising income because of inflation. In the first year, Rs five lakh may be your requirement. However, you would need more than that in the fourth or fifth year. And with time, the requirement will keep increasing.

A more aggressive plan would be to keep a withdrawal rate of around six to seven per cent. But then, there is a possibility that you would be consuming a part of your capital. However, even then, I think you will not run the risk of outliving your savings. But if the withdrawal rate is more than 10 per cent, then there is a possibility that you will consume all your capital and may outlive your savings.