Aditi and Aarav Kulkarni (an illustrative profile) live in Kothrud, Pune. Aarav is 38, Aditi is 36, and between them they spend about ₹85,000 a month. A colleague told Aarav that "₹2 crore is enough to retire", and he has been working towards that number for three years without ever checking where it came from.
The honest answer is that ₹2 crore may be too little, about right, or more than they need. It depends entirely on what their life costs, and on how many years of rising prices lie between today and the day they stop working. That is where every retirement plan should begin.
In this chapter
- How to sort today's spending into costs that continue, end or grow after retirement
- What inflation is and how it multiplies your expenses over 10 to 30 years
- Why health costs need their own, higher growth rate
- A complete worked example that ends with one usable number
Why a round number is the wrong starting point
Figures like "₹1 crore" or "₹2 crore" travel well in conversation because they are easy to remember. But a target corpus is only meaningful when it is linked to a monthly income, and that income has to match a particular household's spending. A couple spending ₹40,000 a month in a paid-off flat and a family spending ₹1.5 lakh a month in a rented home in Mumbai need very different amounts, even if they retire on the same day.
Starting from expenses also makes the plan personal and testable. If your spending changes, you can update the target in minutes instead of guessing again.
Sort your spending into four groups
Take three months of bank and card statements, add up the totals, and divide by three to get a monthly average. Then group every item:
- Essentials that continue: groceries, electricity, phone and internet, house help, transport, society maintenance, property tax.
- Lifestyle that continues: eating out, travel, hobbies, gifts, festivals, support to parents or relatives.
- Health: medicines, doctor visits, tests and health insurance premiums. Keep this separate, for reasons explained below.
- Costs that will end: home loan EMIs, children's school and college fees, premiums on policies that mature before retirement, and your own retirement SIPs (once you retire, you stop saving for retirement).
The first three groups go into the retirement estimate. The fourth does not. Then think about what will be new: more travel in the early years, a car replacement every eight to ten years, home repairs, and perhaps paid help as you get older. Add a realistic monthly amount for these.
What inflation does to your spending
Inflation is the rate at which the general price level rises, measured in India by the Consumer Price Index (CPI), a basket of everyday goods and services tracked by the government. Headline CPI inflation was 5.54% in September 2026. Over long periods Indian inflation has tended to stay in the mid-single digits, so this module uses 6% a year as a planning assumption.
Six per cent sounds small, but it compounds: each year's price rise is applied to the already higher price of the previous year. A helpful shortcut is the rule of 72: divide 72 by the inflation rate to see roughly how many years it takes prices to double. At 6%, that is 12 years. A 35-year-old today will see prices double about twice before turning 60.
| Years until retirement | Multiple at 5% | Multiple at 6% | Multiple at 7% | ₹50,000 a month today becomes (at 6%) |
|---|---|---|---|---|
| 10 | 1.63× | 1.79× | 1.97× | about ₹89,500 |
| 15 | 2.08× | 2.40× | 2.76× | about ₹1.20 lakh |
| 20 | 2.65× | 3.21× | 3.87× | about ₹1.60 lakh |
| 25 | 3.39× | 4.29× | 5.43× | about ₹2.15 lakh |
| 30 | 4.32× | 5.74× | 7.61× | about ₹2.87 lakh |
Notice how sensitive the result is. Over 25 years, the gap between 5% and 7% inflation is the difference between 3.4 and 5.4 times today's spending. That is why it is wise to plan with a slightly cautious inflation figure and review it every year.
Why health costs get their own line
Medical costs in India have been rising faster than general prices. Aon, the global insurance broker, projected India's medical cost trend at 11.5% for 2026. Hospital procedures, diagnostics and new treatments are a large part of this. Retirees also tend to use more healthcare simply because of age.
A single annual rate for 20 years is uncertain, so this chapter uses 9% a year for health spending as an illustrative long-term assumption: lower than the current trend, but well above general inflation. Large hospital bills should be covered by health insurance bought well before retirement (see the health insurance chapter). The figure here is only for routine spending such as medicines, consultations and premiums.
Worked example: the Kulkarnis' first-year retirement spending
Inputs: Aarav plans to retire at 60, which is 22 years away. General inflation is assumed at 6% and health inflation at 9%. Their ₹85,000 a month today splits as: essentials ₹40,000, lifestyle ₹14,000, health ₹6,000, home loan EMI ₹18,000 and school fees ₹7,000.
- Remove costs that will end. The EMI (₹18,000) and school fees (₹7,000) will be over by 60, so ₹25,000 drops out. That leaves ₹60,000.
- Add new retirement costs. They add ₹3,000 a month for extra travel and home repairs. Non-health spending becomes ₹40,000 + ₹14,000 + ₹3,000 = ₹57,000.
- Inflate non-health spending. 1.06 raised to 22 years is about 3.60. So ₹57,000 × 3.60 ≈ ₹2.05 lakh a month.
- Inflate health spending separately. 1.09 raised to 22 years is about 6.66. So ₹6,000 × 6.66 ≈ ₹40,000 a month.
- Add them up. ₹2.05 lakh + ₹0.40 lakh ≈ ₹2.45 lakh a month, or about ₹29.4 lakh in the first year of retirement.
In today's money, that is the same lifestyle they enjoy now. It looks large only because it is expressed in rupees of 2048. Chapter 2 turns this number into a target corpus, and you will see why the "₹2 crore" figure was not built on their life.
Common mistakes to avoid
- Assuming expenses will halve after retirement. Commuting and EMIs fall away, but health, travel and home upkeep often rise, so the drop is usually smaller than people expect.
- Planning in today's rupees. A target that ignores 20 years of inflation can fall short by three or four times.
- Using one inflation rate for everything. Health costs that grow faster than the rest can quietly become the largest item in your budget by your seventies.
- Forgetting irregular costs. Car replacement, family weddings and support to children or parents arrive every few years and are easy to leave out of a monthly average.
- Estimating from memory. Most people underestimate spending by a wide margin; three months of statements are far more reliable.
Try this yourself: Open your last three months of bank and card statements and total your household spending. Split it into the four groups above, drop the costs that will end, add any new retirement costs, and multiply by the 6% multiple from the table for your years to retirement. Inflate health spending separately with a higher rate. Write the result down: it is your first-year retirement spending and the starting point for Chapter 2. The free financial planner can do the year-by-year projection for you.
Frequently asked questions
What inflation rate should I use for retirement planning in India?
Many planners use 6% a year for general household spending, which is slightly above recent CPI readings and allows some margin. Health costs deserve a higher assumption because medical inflation has been running well above general inflation. Whatever you choose, review it every year rather than treating it as fixed.
Should I include my children's expenses in my retirement budget?
Leave out costs that will end, such as school fees, but plan separately for big goals like higher education and weddings. Mixing them into retirement spending makes both estimates unreliable. If you expect to keep supporting a child or a parent after retirement, include that amount as a continuing cost.
Do expenses really fall after retirement?
Some do: EMIs, commuting, work clothes and retirement saving itself. Others rise, especially health, travel in the early years and paid help later. For most households the net effect is a modest fall at best, which is why it is safer to start from your full continuing lifestyle.
How often should I recalculate my retirement spending?
Once a year is enough for most families, and also after any major change such as a new home, a job move or a child becoming independent. Small yearly updates keep the target realistic without constant recalculation.
Use the free Money n Wealth financial planner to project your spending year by year, and read our retirement planning guide for the wider picture before moving on to Chapter 2.