How to save for retirement: Investment tips for moderate risk takers

livemint.com:

—Name withheld on requestIf you plan to retire at 50, you will need to build a big enough corpus to last you through 30-35 years of retirement, or even longer. Considering inflation, and the extended period in retirement will necessitate a larger corpus than ₹2 crore to provide for your needs. Let's assume you will need ₹75,000 per month to sustain your expenses.

This is 50% of your current income.If your retirement corpus of ₹2 crore (current prices) earns 9% returns, it will sustain inflation adjusted withdrawals of ₹75,000 for 32 years. This factors in a 7% increase in withdrawals every year to account for inflation.Your investment portfolio of ₹18 lakh has roughly 50% in equities and 50% in debt. The post-tax blended returns from this asset mix can be assumed at 9%.

While 9% returns can be considered good after retirement, they may not build a big enough corpus for you in the accumulation phase.You are confident that you can earmark ₹60,000 (40% of current income) for retirement savings every month. But at 9% compounded returns, your corpus at 50 will be only ₹1.08 crore. If you withdraw ₹75,000 a month from this corpus, you will run out of money in less than 15 years (when you are 65).If you want a bigger corpus that will last 30 years or more, you should increase the investment amount every year.

A 10% increase in mutual fund SIPs and other investments every year will boost the corpus to ₹2 crore.If increasing SIPs and other investments is not possible, you should consider deferring the retirement date by 3-4 years. It will not only help build a bigger corpus but the required sum will be lower because the retirement period will get shortened.A third way to build a bigger corpus is changing your asset mix. Instead