Retirement Planning
The 3 Mistakes in 40Cr Retirement Corpus claim!
Recently, some reels went viral…
Recently, some reels went viral where a portfolio management firm declared that a 40-year-old media personality (@sonia shenoy) needs a ₹40 Cr retirement corpus.
This obviously is out of reach for a very large fraction of the population. The problem with setting such high targets is that people may end up sacrificing their quality of life in an attempt to save excessively.
Visual: Businesswoman in an office looking at a tablet displaying ₹40 Crore alongside financial charts. Papers on the desk mention inflation and retirement, with a city skyline in the background.
Why we looked into the claim
Some of our clients reached out, trying to understand whether they needed to update their retirement plans.
That prompted us to examine the claims, and we found several glaring inaccuracies.
Assumptions used
Current Age: 40
Retirement Age: 60
Longevity: 90
Current Expenses: ₹2L/month
House: Living in a self-owned house
How the ₹40 Cr figure was calculated
The reels assume:
9% inflation
9% portfolio return
Using:
₹2L/month × 12 months × (1 + 9%)²⁰ × 30 ≈ ₹40 Cr
At first glance, the biggest issue becomes obvious.
There are three major mistakes in this approach.
Mistake #1
Some expenses that exist today disappear after retirement.
For example:
Kids' education expenses no longer continue after retirement.
Mistake #2
Using 9% overall inflation is a severe overestimate because it includes categories such as education inflation that won't apply throughout retirement.
Mistake #3
Assuming only 9% portfolio returns both during the next 20 years and throughout retirement is unnecessarily conservative.
A more realistic expense projection
Expense Head | Current (/month) | Inflation Rate | At Retirement |
|---|---|---|---|
Household + Utilities | ₹100,000 | 6% | ₹320,714 |
Kids Education | ₹20,000 | 10% | ₹0 |
Medical | ₹10,000 | 12% | ₹96,463 |
Discretionary | ₹70,000 | 10% | ₹470,925 |
Total | ₹200,000 | — | ₹888,101 |
Corpus Comparison
Corpus (using viral assumptions): ₹266,430,442
Portfolio Growth Rate (post-tax): 9%
Financial Independence Number: ₹47,539,421
What does this actually mean?
The annual retirement expenses come to roughly ₹1 Cr per year.
A 30-year retirement can generally be supported with approximately a 25× corpus, based on the widely used 4% withdrawal rule in FIRE communities.
Simple math therefore puts the required retirement corpus at approximately ₹26 Cr, not ₹40 Cr.
An important perspective
The other thing to note is that this ₹26 Cr retirement corpus is equivalent to roughly ₹4.75 Cr in today's value.
So, if you have approximately ₹5 Cr already saved towards retirement while spending around ₹2L per month, you're in a strong position.
Don't be intimidated by the ₹40 Cr headline.
Final thought
Are you planning your retirement based on viral reels, or on personalized financial math?
Let's discuss in the comments.
Footnotes
William Bengen, the original formulator of the 4% withdrawal rule, has since suggested that a properly constructed portfolio (rather than a traditional 60:40 Equity:Bond portfolio) may support a 5% withdrawal rate. We'll cover this in a future post.
There are several other inaccuracies in the financial plan that we've omitted here for brevity.
