Retirement corpus: ₹3.75 crore or ₹4.62 crore -- How much do you need for your golden years in India?

A retirement corpus of ₹4.62 crore may be needed to generate ₹15 lakh a year at a 3.25% withdrawal rate, according to financial planner Niraj Dugar. The figure is nearly ₹90 lakh higher than the ₹3.75 crore corpus required if a retiree assumes a 4% annual withdrawal rate, highlighting why retirement planning may need to account for India-specific conditions.

Dugar, in a series of posts on X, illustrated how the corpus required to generate ₹15 lakh a year changes depending on the assumed withdrawal rate. At 4%, the required corpus is ₹3.75 crore. At 3.5%, it rises to ₹4.29 crore, while a 3.25% rate takes the requirement to ₹4.62 crore. At a 3% withdrawal rate, the corpus rises further to ₹5 crore.

“The real number was ₹4.62 crore, nearly ₹90 lakh more than he assumed,” Dugar said, adding that calculating the retirement corpus is only one part of the exercise. The other is deciding how to invest the money over a retirement that could last 30 to 40 years.

Retirement planning changes with a pension

Dugar said retirees with a pension have a different financial requirement because the pension provides a regular monthly income and, in his framework, rises with inflation. For such retirees, he suggested maintaining health insurance and keeping about six months of expenses in an emergency fund.

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Money earmarked for short-term goals could be held in arbitrage or low-equity hybrid funds, he said. The remaining corpus, which may largely be intended for inheritance, could be invested in equities for the long term rather than endowment or pension plans.

He also recommended writing a will and enjoying retirement after years of work.

No pension? Corpus has to last decades

For retirees without a pension, Dugar said the approach needs to be more cautious because the entire corpus may have to fund expenses for 30 to 40 years.

His suggested priorities include securing health insurance and maintaining an emergency fund to cover expenses that insurance does not. He also advised funding children's financial goals only after ensuring that one's own retirement is secure.

For generating regular income, Dugar suggested creating a monthly income bucket using instruments such as the Senior Citizen Savings Scheme and fixed deposits. He cited an income target of around ₹12 lakh a year and suggested investing excess funds in investments capable of beating inflation, while using a systematic withdrawal plan (SWP) to top up income as inflation increases expenses.

Dugar concluded that retirement planning has two distinct challenges: determining the right corpus for India's conditions and investing it so that it lasts through retirement.

“The 4% rule is a fine start. Just not an Indian one,” he said.

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