Retirement planning: the process and the corpus
Work out the corpus your retirement needs, then build it while you earn.
Retirement planning is working out how much money you will need to live on after your salary stops, and building and spending that corpus so it lasts. It has two phases: accumulation, while you earn and invest, and distribution, when you draw income from what you built.
The arithmetic is simple once you fix four numbers: today's expenses, years to retirement, years in retirement, and the rates you assume for inflation and returns. The hard part is the assumptions, which is why the plan is reviewed every year.
You save ₹500
- Full-length mock tests
- Chapter-wise question bank
- AI study plan
One payment, no subscription · Valid for 1 month
The retirement planning process
- 1
1. Understand the client
Age, retirement age, family, health, current expenses, assets, debts and what retirement should look like.
- 2
2. Estimate expenses in retirement
Start from today's spending. Some costs fall (commuting, EMIs, children's fees); others rise (health care, travel).
- 3
3. Inflate to the retirement date
Today's monthly cost grows with inflation over the years left to retire.
- 4
4. Size the corpus
The amount that, invested at a post-retirement return, pays the inflating expense for the expected years in retirement.
- 5
5. Fund the gap
Subtract what existing savings will grow to, then work out the monthly investment needed and choose products for it.
- 6
6. Plan the drawdown and review
Decide how income will be drawn after retirement, and revisit the plan yearly or when life changes.
Worked example: sizing the corpus
Illustrative assumptions only; not a forecast of any return. Rohan is 35, spends ₹50,000 a month, and plans to retire at 60.
Expense today
Assumption
₹50,000 a month
Result
₹6,00,000 a year
Expense in the first year of retirement
Assumption
6% inflation for 25 years
Result
About ₹25.75 lakh a year
Corpus needed at 60
Assumption
25 years in retirement, 7% return after retirement, expenses still rising at 6%, withdrawn at the start of each year
Result
About ₹5.76 crore
Monthly investment from 35
Assumption
10% a year return, compounded monthly, for 25 years, no existing savings
Result
About ₹43,500 a month
| Step | Assumption | Result |
|---|---|---|
| Expense today | ₹50,000 a month | ₹6,00,000 a year |
| Expense in the first year of retirement | 6% inflation for 25 years | About ₹25.75 lakh a year |
| Corpus needed at 60 | 25 years in retirement, 7% return after retirement, expenses still rising at 6%, withdrawn at the start of each year | About ₹5.76 crore |
| Monthly investment from 35 | 10% a year return, compounded monthly, for 25 years, no existing savings | About ₹43,500 a month |
Risks the plan must cover
- check_circleLongevity risk: living longer than planned and outliving the corpus. Plans often assume a long life for this reason.
- check_circleInflation risk: a fixed pension loses buying power every year.
- check_circleSequence risk: a market fall just before or after retirement does more damage than the same fall twenty years earlier.
- check_circleHealth cost risk: medical bills rise with age and may not be fully insured.
- check_circleInterest rate risk: lower rates at the time an annuity is bought mean lower income for life.
Free account, this exam preselected.
Products used for retirement
Each fits a different job. None is a recommendation.
- EPF and PPF
- Long-term, government-backed savings that build part of the corpus during working years.
- National Pension System (NPS)
- A PFRDA-regulated pension account. At normal exit, non-government subscribers can now take up to 80% as a lump sum and must use at least 20% to buy an annuity, with extra options for smaller corpuses, under amendments PFRDA notified in December 2025. Tax treatment is covered on the NPS tax benefit page.
- Mutual funds
- Used for growth while accumulating, and for a systematic withdrawal plan (SWP) to draw income later.
- Annuity
- A contract that pays a regular income, often for life, in exchange for a lump sum. It removes longevity risk but locks in the rate.
- Bucket strategy
- Splitting the corpus into near-term (safe, liquid), medium-term and long-term (growth) buckets, refilling the near bucket from the others.
How XVII tests this
Chapters 3 (Retirement Planning) and 7 (Retirement Planning Strategies) of the XVII workbook cover this. The paper is 100 marks with a pass at 60 out of 100 (60%). Expect numerical questions that inflate an expense, size a corpus or find a monthly saving, and scenario questions on which risk a client faces.
The traps: using a nominal return where the question wants a real (inflation-adjusted) one, forgetting to inflate today's expense before sizing the corpus, and mixing up ordinary annuity and annuity due when withdrawals start at the beginning of each year.
FAQs
What is retirement planning?expand_more
Estimating the money you will need after you stop earning, building that corpus while you work, and drawing it down so it lasts as long as you do.
How do I calculate my retirement corpus?expand_more
Inflate today's expenses to your retirement date, then find the lump sum that, invested at a post-retirement return, pays those rising expenses for the years you expect to live in retirement.
What is the right age to start retirement planning?expand_more
No rule sets one. Starting early lowers the monthly amount needed, because compounding has more years to work.
Is NPS enough for retirement?expand_more
It depends on contributions, returns and expenses. NPS is one product among several; a plan sizes the full corpus first and then decides what share each product carries.
Access exam-specific mock tests directly from your Android device.Trusted by learners and rated 4.6★ on Google Play.