How much savings do you need to do today to create the desired retirement corpus?
The amount of savings depends on a lot of factors. Some of them include the following –
1. Disposable income:
The first thing determining how much you can save for retirement is your disposable income, i.e., income left after meeting your expenses. This income can be allocated to investments and determines your saving capacity. If your disposable income is high, you can save more, but if it is limited, your savings might also be limited.
2. Investment tenure:
The next factor is the investment tenure. If you start saving early, you have a long-term investment horizon. This allows you to save in small amounts and still build up a good retirement corpus with the power of compounding. However, if your investment tenure is limited, you need to save more to create the desired corpus.
For instance, say you start investing at 30 years of age and plan to retire at 65. You have 35 years of investment tenure. If you want to create a corpus of ₹2 crores at an assumed interest rate of 12% p.a., you can save ₹3250 per month and build up a corpus of ₹2.09 crores. On the other hand, if you start investing at 40 years of age, your investment tenure reduces to 25 years. In this case, you will have to save ₹11,000 per month to create a corpus of ₹2.06 crores.
[Future Value= (Rate=12% p.a., i.e. 12%/12, total number of payment period=35 years *12 months, i.e. 420, each payment=3250, Present Value=0) to get Rs. 2.09 crores.
For the second calculation, Future Value = (Rate=12% p.a. , i.e. 12%/12, total number of payment period=25 years *12 months, i.e. 300, each payment= 11000, Present Value=0) to get Rs 2.06 crores]
3. Other financial goals:
Your other goals also affect your retirement savings. You try to save for those goals, too, which reduces your disposable income and your ability to save for retirement.
For instance, if you have a monthly disposable income of ₹20,000 and you have to save for buying a home, marriage and retirement, the previous two goals will take precedence over retirement. You might allocate ₹8000 each for the first two goals and the remaining ₹4000 for retirement. On the other hand, if you only want to plan for marriage and retirement, you can save more towards retirement.
4. Expected returns from investment:
The expected returns from investment also determine how much you save. If you expect to earn high returns, you can save less and still create a good corpus. However, if the returns are low, you need to save more to create the desired corpus.
5. Calculated retirement corpus:
The corpus that you want to create for retirement will affect your savings. A higher corpus will require higher savings than a lower corpus if the interest rate and investment horizon are constant.
6. Inflation rate:
Inflation increases the prices of goods and services and thus affects your retirement corpus. If it increases the retirement fund, you will have to save more to tackle the inflationary effect.
7. Existing assets:
Existing assets can help you fund your needs after retirement. As such, they reduce the required retirement corpus, which can be achieved with lower savings.
8. Existing liabilities
If you have existing liabilities that might continue even after retirement, you will need a bigger retirement fund to factor into the repayment of the outstanding debt. As the retirement corpus increases, so does the savings needed to build it.
An ISO 9001:2015 
