Will ₹6 crore be enough for retirement? How to plan for a secure future

I am 38 years old, earning ₹1.80 lakh per month, with monthly expenses of ₹1 lakh. My current investments include ₹8,000 in NPS, ₹6,000 in VPF, ₹18,000 in EPF, and ₹50,000 per month in equity mutual funds. 

My accumulated savings stand at ₹7 lakh in NPS Tier 1, ₹15 lakh in PPF, ₹14 lakh in EPF, ₹28 lakh in mutual funds (including ₹2 lakh in a debt fund for emergencies), ₹2 lakh in fixed deposits, ₹4 lakh in equity stocks, and ₹10 lakh in corporate fixed deposits and sovereign gold bonds. 

I also have a pending home loan of ₹6 lakh, which I plan to clear in the next three years. My goal is to build a retirement corpus of ₹6 crore by the age of 60. Will this be sufficient to sustain my post-retirement lifestyle, and how should I plan my investments to achieve this goal?

-Name withheld on request.

You have a well-structured investment portfolio, and you may be able to reach your ₹6 crore retirement goal earlier than expected. 

Read this | How you can calculate your early retirement fund

However, considering inflation and a life expectancy of 85, this amount may not be enough to sustain your current lifestyle. At 7% inflation, a ₹6 crore corpus would generate only ₹52,000 per month in passive income, which is significantly lower than your current monthly expenses of ₹1 lakh. To maintain your standard of living post-retirement, you should aim for at least ₹12 crore.

Given your disciplined investment approach, this target is well within reach.

Assuming an average annual return of 10%, your existing investments, along with systematic monthly contributions, can grow to approximately ₹14 crore by the time you turn 60, ensuring financial security. 

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Your investments are spread across multiple instruments. Your ₹50,000 monthly allocation to equity mutual funds, currently valued at ₹26 lakh, is projected to reach ₹9.05 crore at a 12% return. Your Employee Provident Fund (EPF), where you contribute ₹18,000 monthly and currently have ₹14 lakh, is expected to grow to ₹2.09 crore at an 8.25% return. Your National Pension System (NPS) Tier 1 account, with a ₹7 lakh balance and ₹8,000 monthly contributions, could reach ₹1.29 crore at a 10% return.

Read this | How NPS schemes have fared versus benchmark indices

Your Public Provident Fund (PPF), with ₹15 lakh at a 7.1% return, is likely to grow to ₹67.8 lakh, while your ₹6,000 VPF contributions, assuming an 8.25% return, could accumulate to ₹43 lakh. Your direct stock investments, currently at ₹4 lakh, may grow to ₹48.4 lakh at a 12% return. Corporate fixed deposits and sovereign gold bonds, where you have ₹10 lakh, are expected to yield 8%, reaching ₹54.3 lakh. Debt mutual funds and fixed deposits, each with ₹2 lakh at a 7% return, serve as emergency funds. 

Overall, your investment portfolio is projected to reach ₹14.57 crore by 60.

To optimize your portfolio, consider redirecting ₹15,000 per month into equity mutual funds once your home loan is cleared. Financial security also depends on risk management, so maintaining an emergency fund covering at least six months of expenses and ensuring adequate health and life insurance is crucial. 

With these refinements, you can build a robust retirement corpus that not only meets but exceeds your financial needs, providing long-term independence and security. Stay consistent, review your portfolio periodically, and make necessary adjustments for a stable financial future.

Nehal Mota is co-founder & CEO at Finnovate.