Smita has a monthly expenses of . ₹1.25 lakh, excuding home loan, car loan and little amount of. The 35-year-old expects to clear all these loans in the next few years, after which her only major financial responsibility will be her regular monthly expenses.
Smita’s main concern now is about her retirement planning – which includes understanding how much she would need every month after 25 years to maintain a similar lifestyle, and how she should plan her investments today to achieve that goal.
How much Smita should need to maintain similar lifestyle after retirement?
To understand how much she would need in the future to maintain the same lifestyle she currently manages with Rs1.25 lakh a month, she first needs to calculate the of her expenses.
The inflation-adjusted return for ₹1.25 lakh (at today’s purchasing power) would be around ₹5,37 lakh in 25 years, if the rate of inflation remain 6%. Accordingly, if she wants to maintain the same lifestyle, her monthly expenses after that period would rise to around ₹5.37 lakh.
How much corpus should we need to have a ₹5,37 lakh monthly pension?
To generate a of ₹5.40 lakh , the retirement corpus depends on the withdrawal rate assumed. In that case, let’s assume the withdrawal rate is 4%, and then
Required corpus = Rs64.8 lakh ÷ 4% = around Rs16.2 crore
How to invest to build a ₹16.2 crore corpus in 25 years? ‘
If Smita hasn’t started investing towards her retirement yet, she is already late. However, starting now can still make a big difference. For long-term wealth creation, mutual funds can be a prudent investment option for building a retirement corpus.
And at 12 per cent interest rate, she would need to invest around ₹67,000 per month, ideally at
- 60–70% in Large Cap Mutual Funds and Flexi Cap Mutual Funds for stability
- 20–25% in Mid Cap Mutual Funds for growth
- 10–15% in Hybrid Funds for balance
However, if she can increases her SIP by 10–15% every year (step-up SIP). This can reduce the starting burden significantly and help her reach the target faster.
For example, if she plans to increase her SIP by 10% every year, the starting investment required will be much lower, i.e. around ₹38,000–Rs40,000 per month. This means:
- Year 1: ₹40,000/month
- Year 2: ₹44,000/month
- Year 3: ₹48,400/month
This is far more manageable than investing a flat ₹67,000 every month for 25 years.