Retirement corpus targeting
In this chapter: Inflation-adjusted real-rupee targets · Sequence-of-returns risk in withdrawal
Retirement corpus must fund 25-30 years of post-retirement expenses. Calculate target as: (current monthly expense × 12) inflated to retirement age, divided by sustainable withdrawal rate (4-5%). Use real rupees, not nominal. The big risk: sequence of returns — bad early years can deplete corpus faster than averages suggest.
Worked example: 35-year-old, current expense ₹50K/month → ₹6L/year. Inflation 6% over 25 years to age 60 → ₹26L/year. Sustainable corpus at 4%: ₹6.5 crore. SIP needed at 12% pre-tax: ~₹35K/month for 25 years. Sequence-of-returns risk: if first 5 years post-retirement see -5% to -10% returns, the 4% rule fails — corpus depletes in 18 years instead of 30. Mitigations: (1) bucket strategy (3-year cash buffer for early years), (2) partial annuitisation for inflation-impervious base income, (3) dynamic withdrawal (cut spending in down years).
A nuanced insight: the "longevity tail". 50% of 65-year-olds live to 85; 25% live to 90. Plan for the long tail, not the average. Also: retirement transitions are rarely binary in India — many continue earning into 65-70 via consulting, family business, rental income. This phased retirement reduces the corpus required by 30-40%. RIAs should explore phased retirement with every pre-retiree client.