The retirement number almost everyone calculates incorrectly

Ask a retirement calculator how much you need and it will usually do something like this: take your current monthly expenses, inflate them to your retirement date, multiply by twelve, multiply by the number of years you expect to live, and present the result. It is a reasonable-looking sum, and it is wrong in a way that matters.

The error is not in the inflation applied before retirement. It is in what happens afterwards. A calculation that inflates expenses up to age sixty and then holds them flat for the next twenty-five years is assuming that inflation politely stops on your last day of work.

What the arithmetic actually looks like

Suppose you spend ₹80,000 a month today, you are thirty-five, you intend to retire at sixty, and you plan to age eighty-five. Assume 6% inflation throughout and a 7% return on the corpus once you have stopped working.

The second figure is about forty per cent larger. The difference is not a modelling nicety; it is the difference between a plan that funds your eighties and one that quietly runs out somewhere in your late seventies, at exactly the point in life when returning to work is not an option.

Why the level assumption is so common

Partly because it is easier. A level annuity has a tidy closed-form solution; a growing one requires an extra term and a special case for when the growth rate equals the discount rate. Partly because the answer is more comfortable, and a calculator that produces a comfortable number gets shared more often than one that does not.

What this means in practice

• Re-run your retirement projection with inflation-indexed withdrawals. If the number does not move, the calculator was already doing it correctly — check, do not assume.
• Use the real return, computed properly. Over thirty years, the difference between the Fisher relation and naive subtraction is itself worth several years of spending.
• Treat the corpus figure as a moving target. It should be recalculated whenever your expenses change materially, not once at forty and never again.

None of this makes retirement unaffordable. It makes it a larger number than the comfortable version suggests, discovered at thirty-five rather than at sixty-two — which is the entire point of doing the arithmetic early.