Retirement Corpus Calculator with Inflation Adjustment

Retirement Corpus Calculator with Inflation Adjustment

About Retirement Corpus Calculator

This comprehensive retirement calculator helps you determine how much money you'll need to save for a comfortable retirement, taking into account inflation, investment returns, and your current savings. It provides a clear picture of your retirement readiness and suggests adjustments if needed.

Purpose of the Tool

This calculator is designed to:

  • Help you estimate the retirement corpus needed to maintain your lifestyle
  • Show the impact of inflation on future expenses
  • Project your expected retirement savings based on current investments
  • Identify potential shortfalls in your retirement planning
  • Suggest additional monthly savings needed to meet your retirement goals
  • Provide a year-by-year projection of savings growth and retirement needs

Real-world Examples

Example 1: A 35-year-old planning to retire at 60 with ₹50,000 monthly expenses today (₹2.15 lakhs at retirement with 6% inflation) would need ₹4.87 crores corpus for 25 years post-retirement. With ₹10 lakhs current savings and ₹20,000 monthly investments at 8% return, they'll have ₹3.62 crores - a ₹1.25 crore shortfall.

Example 2: A 45-year-old with $5,000 monthly expenses planning to retire at 65 in the US (assuming 3% inflation) needs $2.1 million. With $200,000 current savings and $2,000 monthly investments at 7% return, they'll accumulate $1.4 million - a $700,000 shortfall requiring additional $1,500 monthly savings.

Example 3: A 30-year-old with €3,000 monthly expenses targeting retirement at 55 in Europe (2% inflation) needs €1.8 million for 30 years post-retirement. With €50,000 current savings and €1,500 monthly investments at 6% return, they'll have €1.3 million - requiring either higher returns, more savings, or later retirement.

Formulas and Algorithms

The calculator uses the following mathematical formulas:

1. Retirement Corpus Needed:

Corpus = (Monthly_Expenses × (1 + inflation)^(Retirement_Age - Current_Age)) × 12 × [(1 - (1 + return)^-Life_Expectancy) / (return - inflation)]

This calculates the present value of an inflation-adjusted annuity for your post-retirement years.

2. Future Value of Current Savings:

FV = Current_Savings × (1 + return)^(Retirement_Age - Current_Age)

3. Future Value of Monthly Contributions:

FV = Monthly_Savings × [((1 + return/12)^(12×Years) - 1) / (return/12)] × (1 + return/12)

4. Required Monthly Savings to Cover Shortfall:

PMT = Shortfall × (return/12) / [((1 + return/12)^(12×Years) - 1) × (1 + return/12)]

Privacy Note

This calculator operates entirely in your browser. No financial or personal data you enter is stored, collected, or transmitted to any servers. All calculations are performed locally on your device for complete privacy. The currency selection only affects display formatting, not calculations.

Frequently Asked Questions

How is retirement corpus calculated?

The corpus is calculated based on your projected expenses at retirement (adjusted for inflation) multiplied by the number of years you expect to live after retirement, discounted by your expected investment returns during retirement.

Why is inflation adjustment important?

Inflation reduces purchasing power over time. ₹50,000 today won't buy the same amount in 30 years. We account for this by growing your current expenses at the inflation rate until retirement.

What's a reasonable inflation rate to assume?

For India, 6% is commonly used. For developed countries, 2-3%. Use historical averages or recent trends based on your country's economy.

How do I estimate my post-retirement expenses?

Start with current expenses, adjust for changes (no work costs, more healthcare/travel). Many plan for 70-80% of pre-retirement expenses, but this varies.

What return rate should I assume?

Conservative investors use 6-7%, moderate 8-9%, aggressive 10-12%. Consider your asset allocation and historical returns for those asset classes.

What if I have a shortfall?

You can: 1) Save more monthly, 2) Delay retirement, 3) Increase returns (with higher risk), 4) Reduce retirement expenses, or 5) Combine these strategies.

Should I include pension/Social Security?

Yes, if you expect regular pension payments, you can subtract them from monthly expenses before calculating the corpus needed.

How often should I revisit my retirement plan?

Annually, or when major life changes occur (salary change, marriage, children, inheritance, etc.). Adjust assumptions as you get closer to retirement.