The Ugly Truth: How much should I invest for retirement?

Last Updated on

“How much should I invest/save for retirement?” is a pretty common question (try googling it). This question, like most other, is often asked with the expectation of a nice and comfortable answer. “Be sure to save 10-15% of what you make, for retirement” is an equally common answer. Unfortunately, nice and comforting as it may sound, such answers are often far from the truth.

Retirement planning is complicated because the corpus accumulated is not meant to be spent in one-shot like all other goals. The corpus must not only provide regular income to meet expenses, it must also grow at a rate that at least matches inflation and must be large enough to outlive the individual. This is a tough ask. Any retirement calculation is subject to several assumptions. If these assumptions are not realistic (for example planning with inflation of 6% and equity return of 15%) then results of the calculation would appear comforting even as reality prepares a bitter pill.

Source: SW_illo (flickr)

Many people criticise retirement calculators as an ‘academic exercise’ due to the assumptions involved.Many others think that such calculators are bogus since they output a large monthly investment required for building the retirement corpus. What they fail to understand is that the aim of a retirement calculator is to make people take stock of their money habits.

If the calculator says you need to invest Rs. 30,000 a month to fund your retirement and you can only afford Rs. 15,000, what do you do? Do you say the result is nonsense, invest Rs. 15,000 and do nothing more?Do you adjust the parameters in the calculator (decrease inflation, increase returns before and after retirement and increase the rate at which investments increase each year) until the result is close to Rs. 15,000? Such an attitude is idiotic and suicidal.

A retirement calculator provides an insight into your financial life. If the calculator says you need to invest much more than you can, then the trouble could be (assuming retirement is at least a couple of decades away and other inputs are reasonable: 8-10% inflation, 10-12% equity returns etc.) with your lifestyle. You need to take a good hard look at your expenses and make two lists. One for necessary expenses (food, water, electricity etc.) and one for unnecessary ones. Get rid or reduce the frequency of the unnecessary expenses and be sure to invest the amount saved for your retirement. The primary goal of any retirement calculator is to make you do this exercise.

Getting rid of frequent unnecessary expenses and embracing a frugal lifestyle is the most important step towards financial peace and security. Everything else, investing in the right instruments, seeking returns etc., is a distant second.

If you insist on a thumb rule for retirement savings, then here is a reasonably fool proof one: Reduce expenses as much as you can, invest as much as you can, as early as you can. Your investment should roughly match your expenses (meaning they should increase at least the rate of inflation!) Even if retirement calculators indicate you need to invest less, I strongly suggest you try and invest as much as you possibly can.

Why? If you follow this thumb rule religiously then you naturally tend to keep expenses down. More importantly, adhering to the rule gives you a satisfaction that you have done your best – with regard to optimising the amount you need. That leaves only asset allocation, diversification and rebalancing to worry about!

Do I practice what I preach? Yes, and it has taken me to financial independence within a decade of doing so. This is possible not because I earn a lot (that is relative. In any case an academic earns enough, but never a lot!) but because we (me and my wife) have a frugal lifestyle.

Most people dismiss this saying this is impressive but impractical. Yes I agree that in some cases reducing expenses beyond a point or investing as much as you spend is not possible. However, I am convinced that in a majority of cases it boils down to reducing unnecessary expenses. All one requires is some common sense, a sense of contentment and understand what true happiness is.

Most people misunderstand this attitude. They think this means curbing habits and not enjoying life and counter argue: ‘Life is short, let me enjoy NOW!” etc. I completely agree. We should enjoy life and pamper ourselves … from time to time. Not every month. A frugal lifestyle is one in which you prioritize expenses and have ‘fun’ now and then after all higher priorities are accounted for. That is neither unreasonable nor impossible. It is like most things associated with personal finance, simple commonsense.

Here is a retirement calculator that gives the monthly investment needed as a percentage of your current monthly expenses. Hopefully, it might help provide an insight into your money habits. Safe to that the investment required will be much more than 10-15% of your take-home pay, since your expenses are likely to be much more than that!

Download the excel file

Note: the math involved is the same as a standard retirement calculator.

This post was first published in July 2013. This refurbished version is for the perusal of new freefincal readers.


Ask Questions with this form

And I will respond to them this weekend. I welcome tough questions. Please do not ask for investment advice. Before asking, please search the site if the issue has already been discussed. Thank you.

[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]

Kolkata DIY Investor Workshop May 28th, 2017

Register for the Kolkata DIY Investor Workshop May 28th, 2017

You Can Be Rich Too With Goal-Based Investing

You can be rich too with goal based investing is my new book with PV Subramanyam. If you have not yet got the book, check out the reviews below and use the links to buy.

Reader Quotes:

If you want a book that’s unbiased and that will hold your hand and walk you through the personal finance jungle, then buy this.. the best thing 300 bucks could buy you.

Gift it to your Friends and Relatives whom you care more. Already follower of Pattu and Subra’s forum. Ordered 4 more copies to give gift to my friends and eagerly waiting to read

The best book ever on Financial Freedom Planning. Go get it now!

Your first investment should be buying this book

The (nine online) calculators are really awesome and will give you all possible insights

Thank you, readers, for your generous support and patronage.

Amazon Hardcover Rs. 317. 21% OFF

Kindle at (Rs. 307)

Infibeam Now just Rs. 307 24% OFF.

If you use a mobikwik wallet, and purchase via infibeam, you can get up to 100% cashback!!

Bookadda Rs. 344. Flipkart Rs. 359 ($ 3.70 or Rs. 267)

Google Play Store (Rs. 244.30)

  • Ask the right questions about money
  • get simple solutions
  • Define your goals clearly with worksheets
  • Calculate the correct asset allocation for each goal.
  • Find out how much insurance cover you need, and how much you need to invest with nine online calculator modules
  • Learn to choose mutual funds qualitatively and quantitatively.

More information is available here: A Beginner’s Guide To Make Your Money Dreams Come True!

What Readers Say

Do share if you found this useful

About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media

Content Policy

Freefincal has original unbiased, conflict-of-interest-free,  topical reports, reviews, commentary and analysis on all aspects of personal finance like mutual funds, stocks, insurance etc. All guest authors and contributors to the site also do not have any conflict of interest. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. No promotional content We do not accept sponsored posts and link exchange requests from content writers and agencies. This is our privacy policy Our website is non-profit in nature. The revenue from the advertisement will only be used for hosting charges, domain registration charges, specific plugins necessary for traffic growth and analytics services for search engine optimisation.

Do check out my books

You Can Be Rich Too with Goal-Based Investing

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

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step.  Get the pdf for ₹199 (instant download)

Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.


  1. Even though this is a refurbished blog,idea is original ,message is eternally true.
    If you are someone,extremely busy person,with some sort of contempt for science of personal finance,even then i recommend you to read this blog as it has enough & also everything to give you a better understanding in retirement planning.
    Now ,do not say ,I do not need retirement planning!
    Every living person needs it,may do or not do,is his choice & either pleasure or suffering ,as the case may be.
    Excellent,Do read Boss!

  2. I’m going to show the retirement calculator results to my wife hoping for the ‘desired’ effect ?

    She feels my obsession with invest all and as much more is a bit overboard. This will stop her from saying this is ‘not my thing’ etc hahaha .

    What i take away from this article is the practice to invest as much as possible, spend frugally on the things that don’t matter much and pray daily.

    Always the eye opener your writeups… Many thanks.

Leave a Reply

Your email address will not be published. Required fields are marked *