Why does retirement planning need to account for inflation?

Inflation erodes purchasing power over time — what costs ₹50,000 per month today will cost significantly more in 25 years. At 6% annual inflation, today's ₹50,000 monthly expense becomes ₹214,000 at retirement. Ignoring inflation causes you to severely underestimate how much corpus you need, potentially running out of money during retirement.

What is the 4% withdrawal rule for retirement?

The 4% rule (from the Trinity Study) states that you can safely withdraw 4% of your retirement corpus each year, adjusted for inflation, without depleting it over 30 years. This implies you need 25× your annual retirement expenses as your corpus. For example, if you need ₹6 lakh per year in retirement, you need ₹1.5 crore. This rule assumes a balanced portfolio and may need adjustment based on your specific situation.

What is the FIRE number and how is it calculated?

FIRE (Financial Independence, Retire Early) followers calculate a FIRE number — the corpus at which they can retire. Using the 4% rule: FIRE Number = Annual Expenses × 25. For example, annual expenses of $40,000 requires a $1,000,000 FIRE number. Lean FIRE uses lower expenses for a smaller number; Fat FIRE targets higher expenses for a more comfortable retirement. This calculator helps you project when you can reach your target corpus.

Retirement Savings Calculator

Project a retirement pot from current savings, contributions and expected return, against a target income.

Retirement Savings Calculator

Current Age

Retirement Age

Monthly Expenses Today

Years in Retirement

Inflation Rate (%)

Pre-Retirement Return (%)

Post-Retirement Return (%)

Existing Savings

Retirement Corpus Needed

$2.44M

in 30 years

Monthly SIP Required

$269

per month now

Breakdown

Years to retirement 30 years

Future monthly expenses $17,230

Corpus needed at retirement $2.44M

Existing savings at retirement $1.50M

Additional corpus to build $939.9K

Monthly SIP needed $269

Projecting the pot

Existing savings compound, and each future contribution compounds for the time remaining.

FV = P(1 + r)ⁿ + PMT × [((1 + r)ⁿ − 1) ÷ r]

P: Current retirement savings
PMT: Contribution per period, including any employer match
r: Expected return per period
n: Number of periods until retirement

Worked example

Current savings: 50,000
Monthly contribution: 800
Expected return: 6% annually
Years to retirement: 25

≈ 780,000 — of which 240,000 contributed and 490,000 growth

Include the employer match in the contribution figure. It is part of your compensation, it compounds identically, and not taking it in full is the most expensive common mistake in retirement saving.

The 4% rule, and what it actually claims

The common shorthand is that you can withdraw 4% of your pot in the first year, increase that amount with inflation each year, and have a high probability of not running out over 30 years. It comes from the Trinity study and Bengen's work on historical US market data.

It is a useful reference point and it is widely over-applied. The caveats matter:

It was derived from US market history, which was unusually favourable. Applied to most other countries' historical returns, the safe rate is lower.
It assumes a 30-year horizon. Retiring early needs a lower rate.
It assumes a specific stock/bond mix and does not deduct fees. A 1% annual charge meaningfully reduces the safe rate.
It is highly sensitive to sequence of returns — a severe fall in the first few years of drawdown is far more damaging than the same fall later, because you are selling assets to live on while they are depressed.

Treat 4% as a way to sanity-check a target, not as a plan. Flexible withdrawal — spending less in bad years — improves the odds far more than picking a different fixed percentage.

About

The Retirement Savings Calculator estimates the total corpus you need at retirement and the monthly contribution required to reach it. It accounts for your current age, target retirement age, expected monthly expenses in retirement, the number of years in retirement, an assumed inflation rate to project future expenses, and your expected pre- and post-retirement investment returns. If you already have existing savings, those are grown forward to reduce the additional contribution required. This tool gives you a realistic target so you can start or adjust your savings plan today.

How to use

1 Enter your current age and the age at which you plan to retire.
2 Enter your current monthly expenses — the tool adjusts for inflation at retirement.
3 Set your expected years in retirement (life expectancy minus retirement age).
4 Set the assumed annual inflation rate and pre/post-retirement return rates.
5 Optionally enter existing retirement savings to reduce the required monthly contribution.
6 The tool shows the target corpus and the monthly SIP needed to reach it.

Why does retirement planning need to account for inflation?: Inflation erodes purchasing power over time — what costs ₹50,000 per month today will cost significantly more in 25 years. At 6% annual inflation, today's ₹50,000 monthly expense becomes ₹214,000 at retirement. Ignoring inflation causes you to severely underestimate how much corpus you need, potentially running out of money during retirement.
What is the 4% withdrawal rule for retirement?: The 4% rule (from the Trinity Study) states that you can safely withdraw 4% of your retirement corpus each year, adjusted for inflation, without depleting it over 30 years. This implies you need 25× your annual retirement expenses as your corpus. For example, if you need ₹6 lakh per year in retirement, you need ₹1.5 crore. This rule assumes a balanced portfolio and may need adjustment based on your specific situation.
What is the FIRE number and how is it calculated?: FIRE (Financial Independence, Retire Early) followers calculate a FIRE number — the corpus at which they can retire. Using the 4% rule: FIRE Number = Annual Expenses × 25. For example, annual expenses of $40,000 requires a $1,000,000 FIRE number. Lean FIRE uses lower expenses for a smaller number; Fat FIRE targets higher expenses for a more comfortable retirement. This calculator helps you project when you can reach your target corpus.

The full guide

The 4% Rule Explained: How Much You Actually Need to Retire — and Why the Answer Is "25× Expenses, Roughly" 11 min read

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