Is ₹2 crore enough as retirement corpus?

I will be retiring in the next five years and have been researching how much of a retirement corpus is sufficient for me and my spouse, considering our current monthly expenses are ₹1 lakh. I’ve come across posts on social media suggesting a corpus of ₹2 crore is enough, where I can keep the funds in fixed deposits to cover our expenses. I want to understand if this strategy would work.

—Name withheld on request

It’s great that you’re planning for retirement in advance, as it will help ensure a more comfortable post-retirement life. When calculating your retirement corpus, it’s important to account for all expenses, including additional medical costs and health insurance premiums.

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If your current monthly expenses are ₹1 lakh, in five years, assuming a 6% annual inflation rate, those expenses will rise to ₹1.35 lakh. This should be the starting point for your retirement planning. Additionally, inflation doesn’t stop once you retire; it continues to rise. For example, if your annual expenses are ₹16.20 lakh ( ₹1.35 lakh x 12 months) at the age of 60, they could increase to ₹20.45 lakh by the time you’re 65, and ₹27.36 lakh by the time you’re 70, assuming the same 6% inflation rate. This means your annual requirement will keep growing, and your investments must generate sufficient returns to keep pace with these rising costs.

Relying solely on fixed deposits (FDs) to cover these expenses over a long period may not be practical. Considering a post-retirement period of 25 years, your investments need to be planned accordingly. Instead of just investing in bank FDs, a more effective strategy would be to diversify across debt, hybrid, and equity investments. This blended approach will help generate higher returns, ensuring your needs are met with a smaller corpus compared to relying solely on bank FDs or debt investments.

Another crucial factor is assessing your risk appetite, which depends on your overall retirement portfolio and personal circumstances. If your portfolio lacks sufficient cushion, limiting risk becomes essential, as you’ll rely heavily on these funds. Retirement planning is highly personalized, with factors varying from person to person.

While there’s a wealth of information available on social media and other platforms, it would be wise to consult an investment adviser who can tailor a retirement plan to your specific needs and circumstances.

Harshad Chetanwala is co-founder MyWealthGrowth.com