Retirement Planning

Retirement planning fails most often not because people invest badly, but because they never turn 'I should save for retirement' into an actual number. The first real step is estimating your future monthly expenses — not your current ones. If you spend $520/month today and retire in 25 years, at 6% inflation that same lifestyle costs roughly $2.2K/month by the time you get there.

The second step is estimating how long retirement needs to last. With life expectancy rising, a 30-year retirement (say, retiring at 60, living to 90) is a realistic planning assumption, not a pessimistic one. That means your retirement corpus doesn't just need to cover your first year of expenses — it needs to keep growing enough to outpace inflation across three full decades of withdrawals.

Once you have a target corpus, work backward to a monthly SIP. This is where most people are surprised: reaching a $416K-$520K retirement corpus is very achievable starting in your late 20s or early 30s with a moderate monthly SIP, but the required monthly amount roughly doubles for every decade you delay starting.

One overlooked detail: your equity allocation should generally decrease as retirement approaches. Money you'll withdraw within the next 3-5 years shouldn't be sitting in volatile equity — a market downturn right before or during early retirement can permanently damage a retirement plan in a way it wouldn't for a 30-year-old with decades to recover.

A widely cited starting rule for how much you can withdraw each year is the 4% rule: a corpus roughly 25 times your annual retirement expenses. On the earlier example — $2.2K a month, or about $26.8K a year, once inflation has been applied — that points to a target corpus of roughly $670.8K. It's a rough guide from historical market data, not a guarantee, and many planners now suggest a more conservative 3–3.5% for a retirement that could last 30+ years.

Sequence-of-returns risk is the danger of a market downturn hitting in the first few years of retirement rather than in the middle of your working years. Withdrawing from a shrinking portfolio locks in losses in a way that withdrawing from a growing one doesn't — two retirees with the identical average return over 30 years can end up with very different outcomes purely based on which years the bad returns fell in. This is exactly why the equity share should come down as retirement nears, not just at the point of retiring.

A practical way to manage that risk in early retirement: keep 2–3 years of expenses in cash or short-term debt, so a market fall doesn't force you to sell equity at a loss to cover that year's spending. Refill that buffer from equity gains in the good years, and lean on it instead of selling in the bad ones — a simple rule that does a lot of the work sequence-of-returns risk would otherwise cause.