Methodology & Assumptions

1. Expense inflation

RetLax inflates each expense bucket separately over the pre-retirement horizon:

• Basic expenses: B_ret = B_now × (1 + i_g)^t
• Medical expenses: M_ret = M_now × (1 + i_m)^t
• Lifestyle expenses: L_ret = L_now × (1 + i_l)^t

Each rate is set by the user and the model uses a simple compounding approach.

2. Retirement corpus

The required corpus is the present value of a growing annuity that funds annual retirement withdrawals.

If post-retirement return r equals blended inflation g:

C = W × t_r / (1 + r)

Otherwise:

C = W × [1 - ((1 + g) / (1 + r))^t_r] / (r - g)

W is annual retirement expense, t_r is years in retirement.

3. Existing savings

Existing savings are compounded to retirement using the pre-retirement return assumption and then deducted from the corpus requirement.

The model optionally applies a linear glide path to annual returns when enabled, shifting expected returns from pre-retirement to post-retirement levels.

4. SIP calculation

Required monthly SIP is found with a binary search that solves for the monthly payment whose future value at retirement matches the target corpus.

With top-up enabled, the model steps up each year by the chosen top-up rate and finds the starting SIP that reaches the same corpus.

5. Monte Carlo assumptions

Monte Carlo uses 500 simulated annual return paths drawn from a log-normal distribution.

• Returns are assumed independent and identically distributed (i.i.d.).
• The model does not capture multi-year correlation, economic cycles, or mean reversion.
• Volatility is set based on the selected post-retirement return and is illustrative only.

6. Known limitations

• The withdrawal tax toggle is a simplified flat-rate adjustment and does not represent full Indian tax slab rules.
• Currency formatting is India-focused and not internationalised.
• Sequence-of-returns risk is shown in Monte Carlo, but the tool does not model detailed historical correlation.
• The tool is illustrative only and is not financial advice.