A retirement corpus is the total sum of money an individual needs to accumulate to cover their living expenses throughout their retirement years without having to earn a regular income. Calculating this amount is crucial because it transforms a vague goal like 'saving for retirement' into a specific, actionable financial target. It helps you understand exactly how much you need to save and invest regularly to live comfortably after you stop working, considering factors like inflation and lifestyle.

For an accurate retirement calculation, especially in a dynamic economy like India's, the most critical inputs are:

• Expected Inflation Rate: India has historically had variable inflation. Underestimating this can lead to a significant shortfall in your corpus. A realistic rate (e.g., 5-6%) is vital.
• Post-Retirement Life Expectancy: This determines how long your corpus needs to last. A longer life expectancy requires a larger corpus.
• Expected Rate of Return: It's important to be realistic about returns on your investments both before and after retirement. A conservative estimate is often safer.
• Future Lifestyle & Medical Expenses: You must account for potential increases in healthcare costs and any changes to your desired lifestyle post-retirement.

These variables have the biggest impact on the final calculated amount, making them essential for a reliable estimate.

The 80% rule is a popular guideline suggesting that you will need approximately 80% of your pre-retirement annual income to maintain a similar standard of living after you retire. For example, if your annual income before retiring is ₹10 lakhs, this rule suggests you'll need around ₹8 lakhs per year in retirement. The logic is that some expenses, like commuting, work-related costs, and retirement savings contributions, will cease, but others, like healthcare, may increase.

Determining the right retirement savings amount is highly personal and goes beyond simple rules of thumb. To find your specific number, you must:

• List Your Current Expenses: Categorise your spending to see where your money goes.
• Envision Your Retired Life: Decide what kind of lifestyle you want. Do you plan to travel extensively, pursue expensive hobbies, or live a quieter life?
• Estimate Post-Retirement Expenses: Adjust your current expense list based on your retirement vision. Remove work-related costs but add anticipated expenses for healthcare, travel, and leisure.
• Factor in Inflation: Use a retirement calculator to project how much your estimated annual expenses will be by the time you retire. This projected annual expense is your true target.

This detailed, personalised approach provides a far more accurate savings goal than relying on a generic percentage.

Considering inflation is absolutely critical because it dictates the future purchasing power of your money. An amount that seems large today will buy significantly less in 20 or 30 years. For example, a monthly expense of ₹50,000 today could become over ₹1,30,000 in 20 years with an average inflation of 5%. If you calculate your retirement corpus without accounting for inflation, you will severely underestimate the amount you need and risk outliving your savings.

Besides the 80% rule, other common guidelines can help with retirement planning:

• The 4% Rule: This rule suggests that you can safely withdraw 4% of your total retirement corpus in your first year of retirement, and then adjust that amount for inflation each subsequent year, without depleting your principal for at least 30 years.
• The Rule of 72: This is a quick way to estimate how long it will take for your investment to double. You simply divide 72 by your annual rate of return. For example, an investment earning 8% per year will double in approximately 9 years (72 / 8 = 9).

These rules are useful for quick estimates but should always be supplemented with a detailed calculation from a comprehensive retirement calculator.

The most common mistakes involve using unrealistic inputs, which leads to a flawed estimate. Key errors include:

• Underestimating Inflation: Using a low inflation rate will make the required corpus seem smaller than it needs to be.
• Overestimating Investment Returns: Being overly optimistic about future market performance can create a false sense of security and lead to under-saving.
• Forgetting Major Future Expenses: People often forget to account for large, one-time expenses in retirement, such as a child's wedding, home renovation, or significant medical procedures.
• Not Updating the Calculation: Retirement planning is not a one-time event. It's crucial to revisit and adjust your calculations every few years as your income, expenses, and life circumstances change.