A retirement plan is a must for everyone. There are several reasons for it, apart from the obvious reason of financial insecurity at an advanced age, when one is perhaps the most vulnerable. It is also required to retire early. Given the immense professional pressure that one goes through these days, many want to hang up one’s boots early and pursue things is life like travelling, pursuing hobbies etc for which one does not usually get time in his/her working life.
Moreover, the average life expectancy is increasing and it needs money to sustain one’s lifestyle for more number of years. Medical expenses rise in old age and the inflation in healthcare is far more than general CPI-based inflation. It also allows one to build a significant corpus so that one can leave some resources for one’s children. Apart from all the above, one of the most significant erosions of wealth is inflation. Therefore, one has to keep investing from an early age. But investing blindly might not yield the desired result. Therefore, one needs to invest in a targeted way — and the first step in this journey is to use a retirement calculator.
What is the formula for retirement planning
Like a few other financial planning calculators, a Retirement Planning Calculator also comes online and free. Let’s see step-by-step how you can use it to chart out your financial planning for the future. After you open a retirement planning calculator, you have to key in the following data: Age now, Retirement age, Life expectancy, Monthly income needed in retirement years, Expected rate of inflation, Expected return on investment (before retirement), Expected return on investment (after retirement) and amount of existing retirement fund.
Now let’s assume the following:
Age now: 30 years
Retirement age: 60 years
Life expectancy: 85 years
Monthly income needed in retirement years: Rs 1,50,000
Expected rate of inflation: 6%
Expected return on investment (before retirement): 12%
Expected return on investment (after retirement): 8%
Amount of existing retirement fund: Rs 10 lakh
After you key in the following data, the retirement planning calculator will show you the following calculations:
Annual income required immediately after retirement: Rs 1.03 crore
Total Corpus Required For After Retirement: Rs 17.60 crore
Monthly Savings Required To Accumulate The Corpus: Rs 50,348.61
The sooner the easier
After this calculation is done, one should take a cue from the last amount Rs 50,348.61. One should ideally consult a financial strategist and find out what are the instruments where one can invest this amount to maximise returns within the risk appetite of an individual. It is clear from the calculations that the sooner one starts to save and invest, the less will be the monthly amount that one needs to invest to reach the desired goal.
Retirement planning is one of the most critical and popular areas of financial planning, since one has to save and invest for the golden years of one’s life, which is arguably the most vulnerable period of one’s life. A retirement planning calculator will help you to invest for financial independence about your post retirement life in an inflation-adjusted manner. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
