Retirement Planning Calculator

4% Rule: Withdraw 4% of retirement corpus annually (adjusted for inflation), corpus lasts 30+ years. US Origin (based on US stock/bond 50-50 portfolio, 1926-1995 data). Example: ₹5 Cr corpus → 4% = ₹20L/year (₹1.67L/month) safe withdrawal. India Adaptation: Use 3-3.5% rule (more conservative). Why: (1) Higher inflation (6% vs US 3%), (2) Longer life expectancy post-retirement, (3) Lower bond yields (6-7% vs US 4-5% historical). Safe Calculation: ₹5 Cr × 3% = ₹15L/year (₹1.25L/month). Asset Allocation: 60% equity (for inflation protection), 30% debt (stability), 10% gold/cash. CRITICAL: Calculate corpus as 25-30x annual expenses (not 20-25x as in US). For ₹1L/month expenses (₹12L/year), need ₹3.6 Cr (30x) minimum.

Formula: Required Corpus = (Annual Expenses × 30) ÷ (1 - Tax Rate). Scenarios: (1) Basic Lifestyle (₹40k/month = ₹4.8L/year): Corpus = ₹4.8L × 30 = ₹1.44 Cr (Tier 2/3 cities, own house, no dependents). (2) Comfortable (₹1L/month = ₹12L/year): Corpus = ₹12L × 30 = ₹3.6 Cr (Metro city, rented, medical insurance). (3) Affluent (₹2.5L/month = ₹30L/year): Corpus = ₹30L × 30 = ₹9 Cr (Luxury lifestyle, travel, premium healthcare). Inflation Adjustment: If retiring in 20 years, multiply by 3.2x (6% annual inflation). Example: Need ₹3.6 Cr today → ₹11.5 Cr in 20 years. Additional Buffers: +20% for medical emergencies (post-60 healthcare costs spike), +10% for dependent support (aging parents/children).

Age-Based Allocation Strategy: (1) Age 25-40 (Accumulation Phase): 80% equity (large-cap 40%, mid-cap 30%, international 10%), 15% debt (PPF, EPF), 5% gold. Focus: Maximum growth, can handle volatility. (2) Age 40-50 (Consolidation): 60% equity, 30% debt, 10% gold. Start reducing risk, lock profits. (3) Age 50-60 (Pre-Retirement): 40% equity, 50% debt (bonds, FDs, Senior Citizen Savings Scheme), 10% gold/cash. Preserve capital, generate income. (4) Age 60+ (Retirement): 30% equity (for inflation protection), 60% debt (monthly income), 10% cash/gold. Longevity protection. Best Instruments: EPF (8.15%, tax-free, mandatory), NPS (market-linked, 10-12%, extra ₹50k tax benefit 80CCD(1B)), PPF (7.1%, tax-free, ₹1.5L annual), SCSS (8.2%, ₹30L limit, for 60+), Equity Mutual Funds (12-15%, LTCG tax-efficient). CRITICAL: Start NPS before 40 (longer compounding = lower monthly burden).

NPS Structure: Government scheme, market-linked returns (equity + debt mix), lock-in till 60. Contributions: Employee contributes (any amount), employer matches (if salaried). Tax Benefits: (1) Employee contribution under 80CCD(1) within ₹1.5L limit (80C), (2) Additional ₹50k under 80CCD(1B) (ONLY for NPS, not 80C), (3) Employer contribution 80CCD(2) (10% of Basic, no limit). Total Tax Saving: ₹1.5L + ₹50k + employer match = ₹2L+ annual deductions. Returns (Historical): Equity (E): 12-14% CAGR, Corporate Debt (C): 8-9%, Government Securities (G): 7-8%. Asset Allocation: Aggressive (75% E, 25% C/G), Moderate (50% E, 50% C/G), Conservative (25% E, 75% C/G). Auto Choice shifts to Conservative as you age. Withdrawal Rules: At 60 → 60% must buy annuity (pension), 40% lump sum (tax-free). Annuity = 6-7% annual payout (₹1L annuity investment = ₹6-7k/year pension). Example: ₹50L corpus at 60 → ₹30L annuity (₹20k/month pension), ₹20L lump sum tax-free.

Income Sources & Tax: (1) Pension/Annuity: Fully taxable as salary income (30% tax if total income above ₹15L). (2) PPF withdrawals: 100% tax-free (principal + interest). (3) EPF withdrawals: Tax-free if withdrawn after 5 years continuous service. (4) NPS lump sum 40%: Tax-free. NPS balance 60% (annuity purchase): Tax-exempt. Annuity income: Fully taxable. (5) Mutual Fund redemptions: LTCG above ₹1.25L @ 12.5% (equity), LTCG @ 20% with indexation (debt). (6) FD Interest: Fully taxable (30% slab if total income high). Senior Citizen Benefits: (1) Higher tax-free limit (₹3L vs ₹2.5L for under 60), (2) Super senior (80+): ₹5L tax-free, (3) SCSS interest under 80TTB ₹50k deduction, (4) Medical expenses 80D ₹50k + ₹50k parents = ₹1L total. Tax Planning: Structure withdrawals to stay under ₹10L taxable (20% bracket). Use PPF/EPF first (tax-free), then NPS lump sum, lastly taxable sources.

Start NOW. Every 5-year delay = 2x monthly savings burden. Example: Goal ₹5 Cr at age 60, 12% return. Start at 25 (35 years): ₹16,460/month = ₹5 Cr. Total invested ₹69L (return ₹4.31 Cr). Start at 30 (30 years): ₹29,500/month = ₹5 Cr. Total invested ₹1.06 Cr (return ₹3.94 Cr). Start at 35 (25 years): ₹53, 900/month = ₹5 Cr. Total invested ₹1.62 Cr (return ₹3.38 Cr). Start at 40 (20 years): ₹1,01,500/month = ₹5 Cr. Total invested ₹2.44 Cr (return ₹2.56 Cr). CRITICAL: 25 vs 40 start = ₹16k vs ₹1L monthly (6x difference, same goal). Power of time greater than power of money. Even ₹5k/month at 25 beats ₹50k/month at 40. Use Step-Up SIP: Start ₹10k, increase 10% annually (matches salary hikes, reduces burden).

FIRE = Achieve FI (corpus = 25-30x annual expenses), Retire Early (before 60, typically 40-45). Types: (1) Lean FIRE: Minimalist lifestyle, ₹30-40k/month, corpus ₹1-1.5 Cr, Tier 2 cities. (2) Fat FIRE: Comfortable lifestyle, ₹1.5-2L/month, corpus ₹5-7 Cr, metros. (3) Barista FIRE: Part-time work for healthcare/basics, investment corpus covers rest. India Challenges: (1) No universal healthcare (need larger medical buffer +30%), (2) Family obligations (parents support, children education), (3) Lower social security (vs Western countries). FIRE Number Calculation: Annual Expenses ₹12L → FIRE = ₹12L × 30 = ₹3.6 Cr. Withdrawal = 3% = ₹10.8L/year (₹90k/month). Shields from inflation: Keep 40% equity even post-FIRE. Path to FIRE: (1) High savings rate (50-70% of income), (2) Aggressive investing (80% equity during accumulation), (3) Low-cost lifestyle (avoid lifestyle inflation), (4) Side income streams (dividends, rental). Typical timeline: 15-20 years from start (age 25-30 to 40-45).

Medical costs = Biggest retirement risk (10-12% annual inflation, vs 6% general inflation). Planning Strategy: (1) Health Insurance: Buy ₹25-50L floater family policy NOW (premiums lower when young). At 60+, premiums spike (₹1.5-2L/year for ₹25L cover). (2) Dedicated Medical Corpus: Separate ₹20-30L for medical emergencies (on top of retirement corpus). Assume ₹5L/year medical expenses post-65 (₹30L total over 15 years, inflation-adjusted = ₹60L). (3) Critical Illness Rider: ₹25-50L coverage (cancer, heart, stroke = major costs). (4) Senior Citizen Health Schemes: After 60, switch to senior-specific plans (HDFC Ergo, Star Health). Cost Breakdown: Age 60-70: ₹2-3L/year (₹30L decade). Age 70-80: ₹4-6L/year (₹50L decade). Age 80+: ₹6-10L/year. Total: ₹80L-₹1.5 Cr lifetime (conservative estimate). Add 20-30% buffer to retirement corpus OR have dedicated ₹30L medical fund. Health = wealth in retirement. Preventive care (annual checkups ₹10k) cheaper than treatment (hospitalization ₹5L+).

Depends on: (1) Loan interest rate, (2) Expected investment return, (3) Age, (4) Risk tolerance. Decision Matrix: Home Loan 8%+, Age 50+, 5-10 years to retirement → CLOSE LOAN (guaranteed 8% post-tax return, reduces monthly outgo). Home Loan under 7%, Age under 45, 15+ years to retirement → KEEP INVESTING (equity 12%+ beats loan cost, benefit from tax deduction Section 24(b) ₹2L interest). Example Calculation: ₹50L loan, 8% interest, ₹40k EMI. Option A: Close (₹50L lump sum) → Save ₹40k/month x 120 months = ₹48L. Entry into retirement debt-free. Option B: Invest ₹50L at 12% (equity), continue EMI from salary → ₹50L becomes ₹1.55 Cr in 10 years (vs ₹48L saved from EMI). Net benefit ₹1 Cr+. CRITICAL: Psychological factor: Debt-free = peace of mind in retirement (huge value). Even if math favors investing, closing loan at 55+ wise (removes fixed obligation, inflation shield). Best: Hybrid approach—partial prepayment (reduce tenure from 20 to 10 years) + invest balance.