How much do I need to retire in 2023?

Published: July 27, 2023 at 6:00 am

A reader inquires, “As I approach my 50th birthday this year, I’m contemplating retirement. What steps should I take to determine the necessary retirement corpus for 2023? My yearly expenses amount to approximately Rs. 6.5 lakhs.”

As mentioned in a recent article – I thought a pension was unnecessary, but age taught me a retirement planning lesson! – there are several ways to estimate the retirement corpus required.

The first is what we would like to call a withdrawal rate estimate. Assuming a 50-year-old individual is expected to live until 90 (considering a cautious estimate), they would have 40 years of retirement. With an anticipated inflation rate of 6% and an overall post-tax return from their retirement corpus at 5%, we can use a spreadsheet formula to calculate the required corpus to be approximately Rs. 3.15 Crores.


Why such a low rate of return? The entire corpus is being considered, and having excessive equity after retirement is not advisable. Even 40% equity seems somewhat elevated. Therefore, it would be more prudent to assume a return lower than inflation to err on the side of caution.

Why is the corpus so low even though the real return is negative? This is because we are planning for immediate retirement. If this were a 30-year-old, the current expenses of Rs. 6.5 lakhs would inflate to almost 21 lakhs after 20 years (at age 50). Then the corpus required will be about Rs. 10 crores. The above corpus will not change much if the return and inflation estimate change, but the real returns stay the same.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

This is just a rough calculation. We can obtain a more accurate estimate (in this case, a bit lower estimate!) and, more importantly, gain insight on investing the corpus using the freefincal robo advisory tool.

The retirement corpus is assumed to be invested in five buckets. It is important to recognize that the figures below are only an illustration. The robo tool’s output is influenced by numerous factors. Therefore, do not extend these numbers or percentages to your own circumstances without conducting a comprehensive retirement planning analysis.

  • An emergency bucket to handle unexpected expenses about 5%: Say Rs. 12 Lakhs
  • An income bucket provides guaranteed income for the first 15 years of retirement.  About 47% of the remaining corpus, or Rs. 104 lakhs, is invested here. There is no equity exposure in this bucket.
  • During this time (first 15 years), investments are made in three buckets: low-risk, medium-risk, and high-risk.
  • The buckets will be actively managed to reduce risk: rebalancing and profit booking from one bucket to another. To understand how this works, try The Retirement Bucket Strategy Simulator.
  • After 15 years, the low-risk bucket will be turned into 100% debt and provide income for about 11 years. After that, the other buckets will also be progressively used.
  • Alternatively, one can manage the buckets so that at all times, 15 years of expenses are always available in the income bucket.

Details of the other buckets are given below.

  • Corpus from a low-Risk bucket that provides retirement income from year 16 to year 26. To provide this income, the low-risk bucket will have an asset allocation of 30% equity and 70% debt during the investment period (years 1 to 15 of retirement). About 27% or Rs. 59 lakhs is invested here.
  • Corpus from a medium-risk bucket will provide retirement income from years 27 to 34. To provide this income, this bucket shall have an asset allocation of 50% equity and 50% debt during the investment period (year 1 to year 26). About 16% or Rs. 35 lakhs is invested here.
  • Corpus from a high-risk bucket will provide retirement income from years 35 to 42. To provide this income, this bucket shall have an asset allocation of 70% equity and 30% debt during the investment period (year 1 to year 34).  About 9% or Rs. 19 lakhs is invested here.

The overall equity exposure is only 33%, excluding the emergency bucket and therefore is reasonably safe. The inflation assumed is 6%, the expected post-tax return from equity is 9%, and the expected post-tax return from fixed income is 5% (for bucket investments).

For the income bucket, we have assumed a fixed income return of 5% for the first 25 years and 4% for the last 15 years -all these numbers can be varied at will by the user in the settings page of the robo advisory tool.

The minimum total corpus required for a reasonably comfortable retirement in 2023 is about Rs. 2,30,00,000 (for a 50-year-old with an initial annual expense of Rs. 6.5 lakhs expected to live until age 90). We can round this off to Rs. 2.5 crores.

You may wonder where the current year features in this calculation. It makes its presence felt via our inflation and return expectations. We should repeat this calculation every year before and after retirement to ensure we make the right underlying assumptions.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)