Rs. 4 crore of retirement corpus is not a common benchmark in India yet, but this may be a safer amount for you if you have a certain lifestyle and wish to maintain it even post-retirement. At a safe withdrawal rate of 4%, it gives about Rs. 16 lakh a year. That can cover everyday expenses, rising medical bills, and some travel for many couples. The figure assumes modest investment returns, inflation, and a long retirement. It’s a practical starting point, not a one-size-fits-all.
Important disclaimer
This is general information, not personalized financial advice. Your ideal corpus depends on your lifestyle choices, family obligations, health, other income sources (pension, PF, rental income), risk appetite, and local tax rules. Consult a certified financial planner and a tax advisor before making decisions.
1. What is a Decent Lifestyle?
Before we discuss a number, we must define “decent lifestyle.” People mean different things by this:
– A comfortable day-to-day life: food, utilities, home maintenance, travel (domestic/ International trips), dining out, hobbies, and socializing.
– Paying for routine and emergency health care without financial stress.
– Maintaining the same relative standard of living after retirement.
– Leaving a modest legacy/Inheritance
2. How do these numbers work?
– Moderate decent monthly expenses at age 60: Rs. 1.25–1.75 lakh net (after tax) comes to about Rs. 15–21 lakh per year.
– More conservative estimate for comfortable living with inflation protection and healthcare buffer: Rs. 20–24 lakh per year.
To convert an annual expense number into a required corpus, we need to use a few core concepts.
a) Inflation
– Inflation reduces purchasing power. India’s general inflation has averaged roughly 5–7% historically and healthcare inflation is often higher (7–10%+).
– Assuming a long-term inflation rate of 5–7% on general expenses, costs can double every 10–14 years.
b) Safe withdrawal rate (SWR)
– SWR is the percentage of your initial portfolio you can withdraw annually (adjusted for inflation) without running out over a target retirement period.
– Many planners use 3–4% in conservative scenarios for multi-decade retirements. Using 4% is common but optimistic if markets are weak or if longevity/healthcare costs rise. A 3.5% rule is more conservative, while you might be better off taking this at 5% to create a buffer
– 4% SWR, on Rs. 4 Cr corpus produces Rs. 16 lakh per year initially.
c) Life expectancy and retirement horizon
– If retiring at 60, plan for at least 25–30 years of retirement (till 85–90), especially if you have a good family medical history or a healthy lifestyle.
– Longer horizons require more conservative withdrawal assumptions.
d) Healthcare and unforeseen costs
– Rising medical costs and critical illness treatments can be large one-off drains on savings.
– Many retirees purchase top-up health insurance and keep a dedicated emergency buffer.
e) Taxes and real returns
– Withdrawals of capital gains, dividends, interest, and annuity payouts may be taxed. Tax reduces your net withdrawal; gross-up your target corpus accordingly.
– Real returns (nominal returns minus inflation) determine whether your corpus lasts. If you plan returns of 6–8% nominal and inflation at 5–6%, real returns are modest, demanding a larger corpus.
3. Straightforward math: How Rs. 4 Cr maps to “decent” corpus
Let’s translate the corpus to annual income under different withdrawal rules:
– 4% rule: 4,00,00,000 × 4% = Rs. 16,00,000 / year → Rs. 1.33 lakh / month
– 3.5% rule: 4,00,00,000 × 3.5% = Rs. 14,00,000 / year → Rs. 1.17 lakh / month
– 5% rule (more aggressive): 4,00,00,000 × 5% = Rs. 20,00,000 / year → Rs. 1.66 lakh / month
Interpretation:
– If you need Rs. 1.3 lakh/month net to sustain your lifestyle (food, utilities, travel, healthcare contributions, taxes), a Rs. 4 Cr corpus under a 4% rule roughly matches that need.
– If your living costs are higher (Rs. 1.5–2 lakh per month), a larger corpus (5–7 Cr) is likely required.
4. How changes in assumptions change the corpus need?
– Higher healthcare inflation: If medical inflation is 8–10%, you need a larger corpus or a higher buffer.
– Lower portfolio returns: If your portfolio’s real return (after inflation) is low, a 4% withdrawal may be unsustainable. That pushes target upward.
– Sequence-of-returns risk: Early negative returns combined with early withdrawals deplete savings faster. Conservative SWR or bucket strategies reduce this risk.
– Longer lifespan: Each additional 5–10 years of lifespan may increase required corpus by 20–30%.
5. Why taxes matter?
– Withdrawals from investments maybe taxed per slab rates or tenure of holding. For example, long-term capital gains (LTCG) may be taxed at 12.5% on amounts exceeding Rs. 1.25 lakh, short-term at 20%. Debt investments are taxed according to the income tax slab. Check with your CA on the current tax for each of your investments
6. Why Healthcare expenses could be a financial stress?
– Medical inflation in India often exceeds general inflation; critical illness treatment costs can be several lakhs.
– Example: a major surgery or cancer treatment could cost Rs. 5–20 lakh today; this may double in 10 years.
– Maintain a dedicated liquid emergency buffer (1–2 years of expenses).
– Buy adequate health insurance with critical illness cover and top-ups before retirement (when premiums are cheaper).
– Consider allocating part of the corpus specifically to a low-volatility “medical buffer” fund.
7. How to withdraw once retired?
A corpus is only useful if withdrawal is planned well. Here are some of the Common strategies:
– Systematic Withdrawal Plan (SWP) from mutual funds: set monthly/quarterly withdrawals while keeping equity exposure for growth.
– Bucket strategy: split assets into short-term (cash and short-term debt), medium-term (bonds/debt), and long-term (equity) buckets. Use short-term for immediate expenses and let long-term grow.
– Annuity + portfolio: convert a portion of corpus to inflation-protected annuity for stable income and keep the remainder invested for growth and flexibility.
– Conservative withdrawal rate: start with 3–3.5% to reduce longevity and sequence risk.
– Dynamic withdrawals: adjust withdrawals based on portfolio performance (e.g., cap increases in good years; reduce withdrawals in bad years).
8. How to reach a Rs. 4 Cr corpus?: savings and returns math
If you want to build 4 Cr by 60, the required monthly SIP depends on:
– Your current age (time to accumulate),
– Expected annual return (CAGR),
– Existing lump sum savings.
Examples (from zero lump sum)
A. Starting at age 35 — 25 years to 60
– Expected annual return 10% (nominal) → monthly SIP ≈ Rs. 30,000
– Expected annual return 12% → monthly SIP ≈ Rs. 21,000
B. Starting at age 40 — 20 years to 60
– 10% return → SIP ≈ Rs. 52,000
– 12% return → SIP ≈ Rs. 36,000
C. Starting at age 45 — 15 years to 60
– 10% return → SIP ≈ Rs. 96,000
– 12% return → SIP ≈ Rs. 80,000
D. Starting at age 50 — 10 years to 60
– 10% return → SIP ≈ Rs. 2.09 lakh
– 12% return → SIP ≈ Rs. 1.62 lakh
Takeaway: Start early — the power of compounding reduces required monthly savings dramatically.
9. What should be the Asset allocation?
– Accumulation (before 60): Typically mixed equity + debt. Younger investors can afford higher equity allocation (60–80%) for growth; as you approach retirement, shift to higher debt/balanced allocation to preserve capital.
– Withdrawal (after 60): A balance is required: keep 40–60% in investments that can grow (equity) to beat inflation, and the rest in safer assets (debt, high-quality bonds, liquid funds).
Also read: What is Retirement planning and why should it be done early in life
6 Stages of retirement planning
Dreaming of 1 Crore retirement corpus in your 40s, it’s possible
