🎯 Retirement Planning6 min read

How to Calculate Your Freedom Number

Forget the scary ₹8 crore numbers. Here's a practical approach using four buckets that accounts for how life actually works.

How to Calculate Your Freedom Number

Forget the scary ₹8 crore numbers from online calculators. Here's a practical, real-world approach.

Open any retirement calculator. Enter your numbers. Watch it spit out ₹8 crore. Feel despair.

Here's the problem: those calculators assume you'll spend the same amount at 80 as you do at 55. They assume inflation will ravage everything equally. They assume you'll live to 95 with zero flexibility.

Life doesn't work that way.

The 90-Year Trap

Most calculators make you plan until age 90 or 95. "Better safe than sorry."

But consider this trade-off:

Planning until 80 might require ₹3 crore. Planning until 90 might require ₹4.5 crore.

That extra ₹1.5 crore means 5 more years of working.

Is it worth sacrificing 5 certain years of freedom (ages 55-60) to prepare for 10 uncertain years (ages 80-90)?

A more practical approach: Plan solidly until 80 with a proper corpus. For beyond 80, have backup options — reverse mortgage, family support, minimal expenses at that age.

The Four Buckets Approach

Instead of one scary number, think in four buckets:

Bucket 1: Regular Living Expenses

This is your monthly spend — food, utilities, transport, entertainment, health insurance premiums.

Key insight: Expenses reduce as you age. - 55-60: Full expenses - 60-70: 15% reduction - 70-80: Another 20% reduction

Bucket 2: Replacement Fund

Things wear out: mobiles, laptops, furniture, appliances.

Rule of thumb: Keep 7-8% of your regular corpus for replacements.

Bucket 3: Life Events

Education, trips, pilgrimages. Must-haves vs nice-to-haves.

Bucket 4: Medical Fortress

Emergency fund for "what if health insurance doesn't cover it."

Recommendation: ₹25-30 lakhs in liquid form.

A Sample Calculation

Assumptions: Current age 45, Retire at 55, Plan until 80, Monthly expense ₹75,000

  • Bucket 1 (Regular Expenses): ~₹2.2 Cr
  • Bucket 2 (Replacements): ~₹15 L
  • Bucket 3 (Life Events): ~₹35 L
  • Bucket 4 (Medical): ₹25 L

Total Freedom Number: ~₹3 Cr

Not ₹8 crore. ₹3 crore.

Ready to calculate? [Try our Freedom Number Calculator →](/tools/freedom-number)