Savings corpus needed for inflation-adjusted retirement spending.
Corpus needed at retirement
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First-year expenses
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Real return used
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Your breakdown
Updates live as you type
Item
Amount
Worked example
Suppose you are 35, plan to retire at 60, and spend Rs 2,400,000 a year today, with an expected
return of 11% and inflation of 8%. Over the 25 years to retirement, that Rs 2,400,000 of spending
inflates at 8% a year to about Rs 16,436,340 in the first year of retirement. The return that matters
in retirement is the real return, which is one plus 11% divided by one plus 8% minus one, about 2.78%
a year. Funding Rs 16,436,340 of inflation-rising spending for 25 years at that real return needs a
lump sum of roughly Rs 293,426,256 at retirement. The corpus looks large because future rupees buy
far less after decades of 8% inflation, so the spending figure has already ballooned by the time you
retire.
Item
Value
Annual expenses today
Rs 2,400,000
Years to retirement
25
First-year expenses (inflated)
Rs 16,436,340
Real return used
2.78%
Corpus needed at retirement
Rs 293,426,256
How it is calculated
The tool first inflates today's annual expenses to the first year of retirement, multiplying them by
one plus inflation raised to the number of years until you retire. It then converts your nominal
expected return into a real return using the Fisher relation, one plus the nominal return divided by
one plus inflation, minus one. The corpus is the present value of an inflation-rising spending stream,
computed as the first-year expenses times one minus one plus the real return raised to the negative
number of retirement years, all divided by the real return. Using the real return is what lets the
pot keep pace with rising prices through retirement rather than running dry early. If the real return
were near zero, the tool falls back to first-year expenses times the number of retirement years. The
figure ignores any state pension or other income, so subtract those separately.
Frequently asked questions
How big a retirement corpus do I need in Pakistan?
Start with your annual expenses today and inflate them to the year you retire. Then work out the lump sum that, invested at your expected return, can pay that inflated amount each year for your retirement span while keeping pace with inflation. This tool uses a real return, which is your nominal return adjusted for inflation, to size the corpus.
Why does Pakistan inflation make retirement planning harder than in low-inflation countries?
Pakistan has experienced persistently high inflation, often in the 8-12% range in recent years, which compresses the real return on savings and sharply inflates the rupee amount needed at retirement. Even a moderate annual expense today balloons to a much larger figure by retirement after two or three decades of high inflation, so the corpus target looks far larger in nominal terms than the same calculation done in a low-inflation economy. Building in a realistic inflation assumption rather than a global average is important for Pakistani savers.
What is a reasonable expected return assumption for retirement savings in Pakistan?
Returns depend heavily on the asset mix. National Savings Schemes have historically offered rates in the 10-15% range, while equity mutual funds benchmarked to the KSE-100 have delivered higher but more volatile long-run returns. A blended real estate, fixed-income, and equity portfolio might target 10-13% nominal, though actual results vary. The real return, which this calculator uses, is your nominal return divided by one plus inflation, minus one, and is typically much lower than the headline rate once Pakistan inflation is applied.
Does the EOBI pension reduce the retirement corpus I need?
Yes, any guaranteed income in retirement reduces the corpus you must save. The EOBI minimum pension is modest, currently around PKR 10,000 a month, but it offsets some spending and should be subtracted from your annual retirement expenses before running this calculator. If you also have a company pension or rental income, reduce the annual expense input by those amounts to arrive at the portion your personal corpus must cover.