To calculate the retirement corpus, we need lots of different details like:

• Current annual/monthly expenses,
• Inflation factor,
• Current age,
• Expected retirement age,
• Life expectancy,
• Current investments, asset & liabilities and many more.

The very first thing you will need  to determine is- how much money you’ll need during retirement in order to live a comfortable life? If you do not know this number then all other numbers will be invalid. Even though there are few ways to calculate how much money you need to retire, there is no surety that the calculation will be precise. One need to do the regular review, once or twice a year,  to check if it’s on track, and be prepared to make the changes where ever required.

The 80% of pre-retirement income method is the simplest method to calculate and estimate the money one will need to live in retirement. Some experts suggest to increase this at 85% of pre-retirement income considering all the factors like high inflation, healthcare cost etc.

What this method generally takes into consideration is that, you will save on the money going towards retirement benefit schemes, investments, EMIs and amount will decrease on expenses like work, commute, clothing etc. But expenses with this method does not consider are- increase in medicine/healthcare cost, retail inflation, traveling etc.

This method is simple, but could not be applicable for all people. Since, there is no detail analysis is done under this method about financial situation of investor, his liabilities, assets and investments, insurance needs etc.; the number could be just an estimation. Further, every investor has different financial situation, income source, have different assets, investments and liabilities.

For example; A business person or a professional generally have irregular source of income. For such people this method of 80% pre-retirement annual income could be completely invalid. OR

A person with high income could end up with high number by using this method. Also, such person may have high savings, assets & investment due to good income source. Therefore, due to this large difference in income ranges, actual percentage of income that one will need to replace during retirement will vary with the individual circumstances.

It’s a good method to guess how much you will need to survive comfortably during retirement and in case if you don’t know how to do detailed analysis. But it’s not suitable to everyone.