Determining Your Target Retirement Corpus
Retirement corpus estimation requires accounting for lifestyle inflation, life expectancy, and pre- and post-retirement investment returns. Your annual living expenses will escalate significantly over the pre-retirement horizon:
Future Expense = Current Expense × (1 + Inflation)^Years
The required retirement corpus is then calculated using an inflation-adjusted growing annuity formula over your anticipated post-retirement life span.
The Importance of Starting Early
Because compounding works exponentially in the final years, delaying retirement investing by even 5 years can double the required monthly savings. An investor starting at age 25 needs less than half the monthly contribution of someone starting at age 35 to accumulate the same target nest egg.