Rs 45K/Month Income at Retirement: Do you have a regular income that you want to sustain for life, even when you retire? Having a regular income gives you mental peace, a type of financial freedom that everyone expects when their active earning years are over. Passive income can bridge the gap at that stage. That income may come from the investment that you make when you are earning.
But how will you calculate the required amount to generate that income?
How will you know the lump sum, yearly, and monthly investment amounts you need to achieve that target?
In this write-up, we will tell how you may calculate that.
Also, if you are a 40-year-old with Rs 45,000 monthly expenses who wants to have inflation-adjusted Rs 45,000 for life at a 6 per cent rise every year.
How large a corpus you may need.
And what may be a one-time, yearly, or monthly SIP investment to achieve that target.
Important factors to know about your retirement corpus
Some of the most important factors to calculate your retirement corpus are-
- Current age
- When you want to retire
- Life expectancy
- Inflation rate
- Pre-retirement annualised return
- Post-retirement annualised return
- If you already have some retirement corpus
Conditions for story calculations
- Current age- 40 years
- Retirement age- 60 years
- Life expectancy- 80 years
- Inflation rate- 6 per cent
- Pre-retirement annualised return- 12 per cent
- Post-retirement annualised return- 7 per cent
- Existing retirement corpus- 0
- Future expenses if your current expenses are Rs 45,000
Here, you need to calculate your expenses till the last month of retirement as per the inflation rate.
If you are 40 years old, your monthly expenses are Rs 45,000, and the inflation rate is 6 per cent, this is how your expenses will rise every year.
You can see that if, as a 40-year-old, your monthly expenses are Rs 45,000, at a 6 per cent inflation rate, the expenses will rise to Rs 1,44,321/month at 60 years of age and Rs 462,857 at 80 years of age, so you need a corpus to maintain these expenses.
Corpus required
Since we need the first payment in the first year of our retirement (60 years of age), we need to calculate the corpus at that stage only.
The estimated yearly amount we need at 60 years of age is Rs 17,31,853.1.
We need the number of retirement years (which is 20 in our case) and the real rate of return (which will be calculated through the post-retirement return and the inflation rate).
At a 7 per cent post-retirement annualised return and 6 per cent inflation, the real rate of investment return will be 0.94 per cent.
If our corpus grows by that percentage, the estimated corpus that we need at 60 years of age is Rs 3,17,27,605.
Lump sum (one-time) amount required to achieve that corpus
At a 12 per cent pre-retirement annualised return, the estimated lump sum amount to reach the corpus target will be Rs 32,89,098.
Yearly investment required to achieve that corpus
The estimated yearly amount of Rs 3,93,161 may help achieve the target at an annualised 12 per cent return.
Monthly SIP investment to achieve that corpus
The estimated monthly SIP investment of Rs 34,492 may help the target of an estimated Rs 3,17,27,605 target.
One-time, yearly, monthly investment growth chart
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
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