Retirement advice usually suggests that you should save as much as you can from the beginning. However, there is another crucial aspect that you must consider – your lifestyle. Here’s a summary of both these aspects, with insights from Michael Kitces (sources mentioned at the end of the article).

It’s important to increase the quantum of your savings. While compounding is talked about often, the reality is that an extra 1% return on a few thousand rupees won’t have a significant impact. But a 1% return on Rs 10 lakh is much more impressive. As you get closer to retirement, an increase in returns could represent a year or two worth of savings.

Saving and creating the savings habit is overwhelmingly the most significant factor that drives the outcome. Although investing is important, saving at the beginning is crucial. Towards the end of your career, how you invest becomes more critical.

Allowing your lifestyle to become more expensive over time means you save less. Your spending increases as your income goes up, and you now need more to retire. It’s hard to decrease your lifestyle once it becomes a habit. As a result, you may end up further from retirement in your late 30s and early 40s than you were on day one.

When you save, take into account your lifestyle’s cost. Regularly upgrading your lifestyle, even with small items, increases the cost of your lifestyle. This can lead to a retirement savings need that is much higher than it was initially.

Savings increase retirement preparedness and reduce retirement need. For example, if Ram and Sita both make Rs 55 lakhs/year at age 35 and take home about Rs 46.75 Lakhs after taxes, and start saving for retirement, Sita saves 25% of her income, and by age 65, her account balance is up to nearly Rs 17.85 Crores. She had already reached Ram’s retirement account balance of Rs 10.65 Crores by the time she was 60! Sita is living on only Rs 31 Lakhs /year instead of Rs 35 lakhs, which means she doesn’t need as much as Ram to retire.

In summary, save aggressively; the more aggressively you save, the less you spend. This means less money is spent upgrading your lifestyle. The people who save the most will need the least to retire.