How much money do I need to retire in India?

Ask ten people how much you need to retire and you will hear ten numbers. "₹1 crore." "₹5 crore." "Twenty-five times your expenses." Most of these are guesses, because the right number depends on three things that are different for every family: how much you spend, how long you have until you retire, and how long you will live after that.

The good news is that the arithmetic itself is simple. You can do it on a single page, and it is far more useful than any number someone quotes on WhatsApp.

What are the three inputs?

1. Your expenses today. Not your salary — what your household actually spends in a year, including school fees, insurance premiums, festivals and travel. Leave out EMIs that will end before you retire, and children's costs that will stop.
2. Inflation until and during retirement. Prices roughly double every 12 to 14 years at 5–6% inflation. Indian consumer inflation has averaged about 4.7% a year over the last ten years and about 6.5% over the last twenty, so 5% to 6% is a reasonable planning range.
3. How many years the money must last. If you retire at 60, plan for at least 25 years, to 85. If your family tends to live long, plan for 30.

The fourth input is the return your money earns after you retire, after tax. Retirees usually keep most of their money in stable instruments, so this is lower than what you might assume while working.

Step 1: Turn today's expenses into retirement-year expenses

Take your yearly expenses and grow them at the assumed inflation rate for every year until retirement.

Illustration: A family spends ₹60,000 a month today, or ₹7.2 lakh a year. The earner is 45 and plans to retire at 60, so there are 15 years to go. At an assumed 6% inflation, ₹7.2 lakh grows to about ₹17.26 lakh a year (₹7.2 lakh × 1.06 raised to the power 15, which is about 2.40). That is roughly ₹1.44 lakh a month at 60, just to live the same way. At an assumed 5% inflation, it is about ₹14.97 lakh a year, or roughly ₹1.25 lakh a month. (Illustrative assumptions, not a forecast.)

The jump surprises most people. Nothing about the lifestyle has changed; only the price tag has.

Step 2: Work out how much is needed to fund 25 years

Now the corpus has to pay those expenses every year from 60 to 85, with the expense rising each year for inflation, while the remaining money keeps earning a modest return.

Here is what that works out to for the same family under four sets of assumptions. The calculation assumes expenses are withdrawn at the start of each year, rise every year with inflation, and the corpus runs down to zero at 85.

So this family's target is somewhere between roughly ₹2.7 crore and ₹3.9 crore at 60. In today's money, that is about ₹1.3 to ₹1.6 crore. All of these are illustrations built on assumptions, not predictions; actual inflation and returns will be different.

Notice how much the assumptions matter. One percentage point more inflation, or one point less return, moves the target by tens of lakhs. That is why it is better to plan with a range than with a single number.

How do you adjust this for your own family?

The corpus scales directly with expenses. If your family spends ₹40,000 a month today instead of ₹60,000, take two-thirds of the figures above. If you spend ₹90,000, take one and a half times.

A few adjustments are worth making:

• Add a medical reserve on top. Health costs often rise faster than general inflation, and a serious illness can cost several lakh even with insurance.
• Subtract any pension. A monthly pension, or reliable rent from a second property, reduces how much the corpus has to provide.
• Plan longer if you retire earlier. Retiring at 55 means 30 years or more to fund, and five fewer years to save.
• Leave out expenses that will end. Home-loan EMIs that close before 60, or a child's fees, should not be grown and carried forward.

What do you already have towards it?

Add up everything earmarked for retirement: EPF, PPF, NPS, FDs, mutual funds, and an estimate of gratuity and leave encashment. Then compare it with the target. The gap is what you still need to build in the years left.

If the gap is large, three levers matter, in this order. First, stop leaks: costly loans and idle money that is earning very little. Second, save more each month, starting with what the month can actually carry. Third, consider working a few years longer, which helps twice — more years of saving and fewer years to fund.

If you are 45 and feel behind, our guide on whether it is too late to start saving at 45 is a good next read. To see what monthly saving builds a given amount under different assumptions, read how much to invest each month to reach ₹1 crore.

What happens once you reach the number?

Reaching the corpus is only half the job. The other half is spending it in the right order, so that near-term money is safe and long-term money has time to grow. We cover that in how to split a retirement corpus of ₹2 crore.

Working out your real expenses, what will stop and what will continue, is exactly what we map in a first conversation. Decisions about specific funds or products to close the gap should be checked with a SEBI-registered adviser against your full situation.