Retiring at 55? 1 Wrong Number Wrecks Your Plan

Most Indians planning for retirement use 12% equity returns in their calculations. That number is dangerously optimistic. Using a realistic post-inflation, post-tax return of 6–7% can mean you need a corpus that is lakhs — sometimes crores — larger than what you originally planned.

Here's what happened: Many retirement planners assume equity mutual funds will deliver 12% or more annually over 20 years — a figure that ignores inflation and taxes.. After accounting for 6–7% inflation and 10% long-term capital gains tax, your real usable return on equity drops closer to 5–7% per year.. Using an inflated return assumption causes savers to under-invest today, leaving a potentially massive gap when they actually retire..

What you should do: Recalculate your retirement corpus using a real return of 6–7% (not 12%) — use a free SIP calculator and input realistic post-tax, post-inflation numbers.. Increase your monthly SIP amount by at least 10–15% immediately if your current plan was built on a 12% return assumption.. Review your retirement plan every 3 years — adjust your SIP step-up rate to match actual fund performance, not projected returns..

Pro tip: Use the '7-20 rule' — for a 20-year retirement horizon, cap your assumed real return at 7%. Every extra 1% you assume incorrectly can inflate your projected corpus by 20–25%, creating a dangerous false sense of security.