Chai Pe Charcha with a Friend: Figuring Out His Retirement Corpus

Jun 2025 - 5 mins read

Last weekend, I met an old acquaintance for chai at our favourite café after ages. The conversation flowed effortlessly—family, work, and the usual stuff. But midway through, he paused and said, “Yaar, I’ve been thinking a lot about retirement lately. How do I know how much is enough? I don’t want to rely on my kids, and I definitely don’t want to downgrade my lifestyle.”

He’s in his early 40s, reasonably sorted financially, but like many of us, unsure about how to plan for that far-off phase called ‘retirement’. I could sense he wanted a clear starting point—something practical, not a lecture filled with jargon. We discussed a couple of angles:

Why Retirement Planning Feels Different Today

Gone are the days when joint families offered a financial safety net. Today, most of us live in nuclear families, especially in metro cities. Even our Retirement Readiness Research (2023) shows that, after COVID especially, people have started preferring nuclear family set ups over joint families—feeling more financially free and secure, as compared to before COVID. Thus, relying on children for financial support is no longer an option for many of us, and honestly, I wouldn’t want to either.

In addition, more and more people are choosing to retire early to pursue other interests, but the reality is that none of us want to compromise on our lifestyle after retirement. But the big question usually remained unanswered –“What one needed as retirement corpus that could stand on its own, providing them with a comfortable life without worrying about running out of money?”

Getting to the Number: With a Simple Rule of Thumb

Like most people, he wondered how much he needs to save to retire comfortably. I mentioned I came across various financial planning exercises and formulas, but one simple thumb rule stood out: the ‘25x rule’ for calculating your retirement corpus derived from the famous Trinity Study, talking of 4% rule as ‘safe withdrawal rate’ – a 1998 research paper by three professors from Trinity University: Philip L. Cooley, Carl M. Hubbard, and Daniel T. Walz. They analysed historical market data to determine a "safe withdrawal rate" for retirees, concluding that ‘withdrawing 4% of your portfolio in the first year of retirement and adjusting for inflation thereafter had a high probability of lasting 30 years or more.

Say if you need Rs 25,000 monthly today i.e. Rs 3 lakhs a year. But by the time you reach 60, the Rs 25,000 will grow to an expense requirement of around Rs 80K /month approx., or Rs 9.6 Lakhs a year, due to 6% inflation roughly.

Now given the 25x rule above, you should multiply your annual expenses at the time of retirement by 25. That’s your retirement corpus!

So, the Rs 9.6 lakhs × 25 = Rs 2.4 crores.

Will ‘Inflation Eat My Money’ further?

Of course, saving that amount was just the first step. Next, we needed a strategy to make it last. Assuming you’d built Rs 2.4 crore corpus, that meant withdrawing about Rs. 9.6 lakhs annually. The logic here is that the remaining amount continues to grow through investments, typically a balanced mix of equity and debt to offset inflation.

I said, “I knew that if you followed this rule with discipline, you’d have enough to maintain your lifestyle. However, you should also consider that if you wanted to leave behind a financial legacy, you’d need to adjust the withdrawal rate or the investment mix.

To make it more simple – I suggest you to look at ‘real returns’—that is, the returns you earn after subtracting inflation. So, if your portfolio earns 10% annually and inflation is 6%, your real return is only 4%. That’s the portion you should look to withdraw & also to maintain your purchasing power.

For example, if you retire with Rs 2.4 crore and earn 10% annually, your actual wealth only grows by 4% in real terms. If you withdraw that 4% (Rs 9.6 lakh a year), you can sustain your lifestyle without eating into your capital.

Having said that, I also told him not to blindly follow the 4% rule or 25x rule, since this is a US study and some suggest this is not appropriate in India’s context; rather a range between 3.0% and 3.5% is more appropriate (Raju & Sarogi, 2024). But I suggested him to work with a financial advisor to build a personalized retirement plan- a plan that fits him —one that changes with his needs, his portfolio’s performance, and any extra income he may have.

Emergency Funds: The Unsung Hero

At this point, I asked him, “Do you have an emergency fund set aside?”

He admitted he didn’t. “I just dip into my mutual funds or FDs if something comes up.”

“That’s a problem,” I said. “Every time you redeem your investments for short-term needs, you disturb your long-term compounding. An emergency fund—ideally 6 to 12 months’ worth of expenses—should be parked in a liquid or ultra-short-term fund. It keeps you from breaking into your long-term assets and protects your financial discipline. Interestingly, now you can also have a loan or credit line against your mutual funds, that can give you an extra safety net. It lets you access money quickly in an emergency without selling your investments.

The Hidden Asset: Mental & Physical health

Slowly, as the conversation shifted to life after retirement, I said, “You know, it’s not just about money. It’s also about identity, purpose, and community and finding the purpose in your life”, to which he instantly agreed saying “ya, so true!”

Many people struggle with the sudden emptiness that retirement can bring. That’s why I encourage people to build secondary skills—things you’re passionate about or good at, that can be monetized later. Whether it’s writing, coaching, baking, consulting, or teaching—this isn’t just about income. It’s about staying mentally sharp, socially active, and emotionally fulfilled.

A friend of mine, a banker, started offering Yoga sessions online during COVID. She started small –earning a modest fee then, which became a considerable amount when she did grow her business. However, more importantly, she enjoys it a lot, feels relevant and connected to herself and even to society.

Similarly, it important to realise and accept that we are growing older and that healthcare planning is also equally crucial—medical emergencies can eat into our savings faster than we expect, so make sure to get a comprehensive health insurance.

More Than Numbers—It’s About Freedom

As we finished our chai, he looked far more at ease. “You’ve made it sound so much more doable,” he said. “I’ve always thought of retirement as something complicated and distant. Now it feels real—and within reach.”

I told him, “Think of it not as retirement, but as building your ‘financial freedom fund’. So you can live life on your terms, without fear or dependence.”— make it a bit more simple and positive as a goal, in your head— you will feel motivated to achieve it.

Because in the end, retirement isn’t the end of something. It’s the beginning of a new chapter—one where money gives you the freedom to choose how you spend your time.

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