What is the formula for calculating retirement savings?

The formula for calculating retirement savings can vary based on individual circumstances and financial goals, but a widely accepted approach estimates how much money you will need to sustain your lifestyle in retirement. A simplified formula is:

Retirement Savings Needed=Annual Expenses × Years in Retirement

Here’s an example, if you anticipate monthly expenses of ₹50,000 during retirement, your annual expenses will be ₹6,00,000 (i.e., ₹50,000 × 12 months). If you plan to enjoy a retirement lasting 30 years, your total retirement savings requirement would be calculated as follows:

Retirement Savings Needed=₹6,00,000×30=₹1,80,00,000

This means you would need approximately ₹1.8 crores to maintain your desired lifestyle over 30 years.

Additionally, many financial planners advocate for the 25x rule, which suggests that you should aim to save 25 times your expected annual expenses to ensure a comfortable retirement. For instance, based on the previous example, you would aim to save:

25×₹6,00,000=₹1,50,00,000

This rule helps account for factors like investment growth and inflation, providing a buffer for unexpected expenses.
Use the Retirement Calculator to plan your retirement savings.