RESUME APPLICATION PAY PREMIUM
Fund Performance

Fund Performance

Knowledge Center

Knowledge Center

About Us

About Us

Tools and Calculators

Tools & Calculators

Quick links

Mobile (Download app)
  • Webpages
  • Documents
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment

For NRI Customers

(To Buy a Policy)

(If you're our existing customer)

For Online Policy Purchase

(New and Ongoing Applications)

Branch Locator

For Existing Customers

(Issued Policy)

Fund Performance Check

RESUME APPLICATION PAY PREMIUM

What do you want to do?

Quick links

Mobile (Download app)

Download HDFC Life App

Buy plans, track your policy, make renewal payments & monitor fund performance with HDFC Life App, Download Now!

Apple Logo Go to Google Play Store

Calculating a retirement corpus that can support your lifestyle

down-arrow
April 19, 2021

Table of Content

 

Retirement, for all working individuals, is inevitable. Today, you could be a committed professional, working hard to meet your professional commitments, and soon you would be the cynosure of all eyes in your farewell party. Yes, time flies, and life goes on! Irrespective of the nature of your profession, you will have to retire one day, typically at the age of 60. And it is always best to start retirement planning early. Retirement comes with its unique advantages, like the freedom to spend more time with your loved ones. Also, it is not a comforting idea to keep working throughout your life. But, the flip side of retirement is that you will require adequate finances to enjoy the golden years of your life. A lack of primary income or other sources of secondary income would mean that you have to compromise on your existing lifestyle. Thus, it is of paramount importance to know the corpus required to retire comfortably.

Here is a look at how to calculate your retirement corpus:

  1. Make the right projections/ assumptions:

    Foremost, you need to make the right projections, including your existing age, the age of retirement, life expectancy, annual income, income growth rate, current savings for retirement, monthly expenses and type of investment plans - be it fixed deposits, Mutual Funds/ULIPs or stock markets. Then you need to consider the rate of returns from your investment plans - both for pre- and post-retirement years. You also need to take into account the existing rate of inflation. 

  2. Account for inflation adjusted returns:

    You must always remember to consider inflation as a vital factor, while calculating yourretirement corpus. Inflation results in rising cost of living, and the actual value of your retirement corpus will erode substantially by the time you retire. In other words, the actual rate of returns from your investment plans will dip sharply, in the face of rising inflation. So, it is important to have a futuristic point of view, while retirement planning.
    For instance, for a 30-year-old individual, having life expectancy of 85 years along with pre- and post-retirement returns as 14% and 7% respectively, the inflation adjusted returns can be calculated by using the formula: (1+rate of return post-retirement) · (1+inflation rate))-1) *100. Suppose the rate of inflation is 7%, then as per the formula, inflation adjusted returns will be 0.93%.

  3. Project for your annual expenses:

    Knowing the amount of money required to support your lifestyle in the golden years of your life also means considering your existing annual expenses. You are then required to adjust the amount with the annual rate of inflation. The Future Value formula, where you have to provide variables such as the amount of money, number of years and rate of inflation can help you arrive at the adjusted rate of inflation. The formula is: Future value = Present amount * (1+inflation rate) ^number of years. For instance, a 30-year-old individual, having existing annual expenses of Rs 7.2 lakh will require Rs 21,01,089 for the same after 30 years, as per the Future Value formula. 

  4. Calculate your retirement corpus:

    Now you can calculate your retirement corpus using the present value formula: Present Value = Future Value · (1+r) ^n, where r is rate of returns, while n is the number of years. For example, if a 30-year-old individual with a life expectancy of 85 years, annual expenses of Rs 54.8 lakh and inflation-adjusted returns of 0.93% wants to calculate the retirement corpus using this formula, the required retirement corpus will come to around Rs 12.28 crore.
    Alternatively, you can also use online tools such as retirement calculator to arrive at the figures of your retirement corpus. For example, if you are a 30-year old individual with an annual income of 7.5 lakh, life expectancy of 85, current income growth rate of 5%, monthly expenses of Rs 10,000, current savings for retirement as Rs 6,000, investment in fixed deposit, rate of interest at 11% and existing rate of inflation at 7.5% , then you can calculate the amount required for retirement, using HDFC's Life's retirement calculator. Taking into account the above-mentioned figures, you will require Rs 26, 204, 490 to fund your retirement. If you add to it the growth of your current savings - at Rs 60,376, - your total retirement corpus now stands at Rs 26, 264,866. As per the calculations, you now need to save Rs 18,187 each month for 30 years.

Conclusion:

Once you have calculated your retirement corpus, and know how much to save, you have taken the right steps towards retirement planning. You can now zero in on the right investment plans to meet your target. Annuity plans, like HDFC Life Pension Guaranteed Plan can help you have a secondary source of income in the golden years of your life. This plan is a single premium annuity product, providing a regular guaranteed income for lifetime. 

^ The word "Guaranteed" and "Guarantee" mean that annuity payout is fixed at the inception of the policy

ARN:ED/11/20/21336

Term Plan Articles Term Plan Articles

Investment Articles Investment Articles

Savings Articles Savings Articles

Life Insurance Articles Life Insurance Articles

Tax Articles Tax Articles

Retirement Articles Retirement Articles

ULIP Articles ULIP Articles

Health Plans Articles Health Plans Articles

Child Plans Articles Child Plans Articles

Popular Calculators Popular Calculators

Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

LinkedIn profile
Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

LinkedIn profile
Reviewed By Reviewed By:

Here's all you should know about life insurance.

We help you to make informed insurance decisions for a lifetime.

What is Family Pension?

What is Family Pension?

What is Family Pension? Explore its eligibility, benefits for government employees, retirees, widows, and tax implications. Understand the differences between regular pension and family pension.

Income Tax on Pensions: Are They Taxable?

Voluntary Retirement Scheme

Pension Payment Order: Definition, Steps, Importance

Pension Payment Order, abbreviated as PPO, is a unique 12-digit code assigned to every pensioner under the Employee Provident Fund (EPF). Read to know how to check it.

Pension Payment Order: Definition, Steps, Importance
What millennials need to know about retirement planning Previous
Is Annuity the Right Option for Retirement? Next
HDFC life
HDFC life

HDFC Life

Reviewed by Life Insurance Experts

HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER

We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

Popular Search

Popular Searches