Whether you are retiring soon or plan to retire after a few years, generating a monthly income of Rs 1 lakh will not happen automatically. It requires planning and effort.
If you are starting your career and your retirement years are far away, the goal of Rs 1 lakh monthly income can be easily achieved. However, if you are in your 40s and 50s and have decided to start a plan now, you will have to work hard. You need to be more focused on your investment.
Today, we will discuss things you need to take care of if you plan to retire today with a Rs 1 lakh income per month. Also, we discuss if your retirement has time, how you can decide on the retirement corpus.
Inflation is a crucial factor to consider
If you are looking for Rs 1 lakh monthly income, the first thing you should be careful about is the time. Have you decided on the monthly amount based on your current expenses or have factored in the inflation?
For example, if today your monthly expenses are Rs 1 lakh and you want to retire after 20 years, assuming 6% inflation, you will need Rs 3.2 lakh per month to have the same living standard. We recommend all our clients to give due importance to inflation for all their future planning.
If your current expense is Rs 30,000 today and your retirement is 20 years, in that case, you will need Rs 1 lakh approximately. With these two numbers, you can estimate what you need at retirement.
Also, if you are 60 today and think you will need Rs 1,00,000 and that amount is sufficient – You are mistaken. Again, because of inflation, you will probably need a lot more by the time you reach 70 or 80. If you are looking for a rough estimate, you will have to make certain assumptions:
- The inflation rate: Given the historical data, you must assume the inflation rate of 6% for all your retirement years.
- Life Expectancy: It is one of the crucial parameters that would decide how much corpus you will need to retire. It is always better to be conservative in this estimate. Taking life expectancy higher than the average is a good idea. Hence, taking a minimum of 80 years and taking 85 years is on the safer side.
Corpus for Rs 1 lakh month income
Before giving you an estimate, we would like to mention that we have taken inflation into consideration post your retirement years. For example, we have assumed that in the first year would need Rs 12.72 lakh (6% inflation), in the second year, you will need Rs 13.48 lakh, and so on.
Assuming a life expectancy of 85 years, you will need approximately Rs 3.5 crore today. We have also assumed that your investment corpus will generate moderate returns of 6%, and your current age is 60 years.
The numbers will change drastically if you are 40 years and you plan to retire today and require the same monthly income.
It is always better to consult a financial advisor to make such calculations as there are too many assumptions and variables that you may miss. We at Right Horizons have years of experience in solving the complex financial needs of our clients and making their financial journey super easy.
Where to invest your retirement corpus?
One of the biggest mistakes most retired people make is that they invest all their corpus in debt with low returns. Given the high inflation, the returns may not beat inflation.
Also, as explained above, the retirement years can be 20 to 25 years or even more. Note that all your retirement funds won’t be needed immediately. Hence, you can put a certain percentage of it in equity. How much? It depends on how much risk you are ready to take. Within equity, there are some safe options, and you can invest in them. Other options can also give you inflation-beating returns.
Before you go
Making the best use of your retirement corpus and generating steady income is not easy – there are too many variables to take care of. If you cannot plan it yourself, please consult a financial advisor. It is something where you cannot afford to go wrong.
P.S – The numbers and assumption used in this article are only for understanding. The actual numbers may vary from person to person.