How much corpus do we need to retire?

When folks read articles, its mostly on planning for retirement and products to invest in for building a retirement corpus.

However, one should know the products one can invest in when he/she retires.
This will help us to understand the amount we may need for the corpus and accordingly plan backwards.

What are the products we have for generating monthly income when we are in retirement or going to retire:

Fixed Deposit

• This is something which is the first option everyone thinks of.
• Do note that interest is falling yearly and if you are in your 30's, no one knows what the interest rate will be when you are in the 50's.

Senior Citizen Savings Scheme (SCSS) Account

• This is an initiative available via Post Office.
• At the present, the interest rate is 9.2% per annum.
• Implies, if you have 1 crore to deposit, you can get 92L per annum (76K per month)

More details on SCSS can be seen here.

Post office monthly income scheme (POMIS)

• This is an initiative available via Post Office.
• At the present, the interest rate is 8.4% per annum.
• Maximum investment limit is INR 4.5 lakhs in single account and INR 9 lakhs in joint account.
• Thus, if the same rate prevails, expect 75600 per annum (6300 per month).

More details on SCSS can be seen here.

Annuities
Read here for more details on annuities

MIP (Monthly income plans)

• MIPs are offered by mutual fund companies.
• One can invest in these for monthly income (though dividend payout or the quantum is not guaranteed).
• At the present moment:

• HDFC MIP LTP (Monthly dividend) provides a dividend of 0.07 Rs (approx) for a unit costing 14.5 Rs (approx).
• Dividend link
• So if one invests 1 crore in this fund, he/she will get 10000000/14.5 = 689655 units.
• Monthly dividend at 0.07 Rs would be 48000 for 1 crore.
• If one invests in a liquid fund, the amount would be calculated as follows:
• HDFC Liquid fund (Monthly dividend) provides a dividend of 0.05 Rs (approx) for a unit costing 10.5 Rs (approx).
• Dividend link
• So if one invests 1 crore in this fund, he/she will get 10000000/10.5 = 952380 units.
• Monthly dividend at 0.05 Rs would be 47619 for 1 crore.

There are some more like FMPs (Fixed maturity plans) which invest in fixed income securities and NSC etc.

Read here for more details.

Recurring deposits (RD)
RD's can be used to plan for retirement. Look at this article for more details.
However, we can use RD to get monthly pension as well. Look at this article for more details.