The importance of retirement planning is going up with time. The expenditure of a person retiring a decade later would be substantially more than what one is incurring today. Therein lies the growing significance of retirement planning.
Cash flow after retirement
A retirement planning calculator helps one to plan for cash flow after retirement. It’s a tool to project the financial needs for the future and start investing now. These calculators are available online and free of cost.
For example, let’s see how one can do it with a calculator available at mutualfundssahihai.com. To use this calculator, one has to make a few projections as accurately possible.
Information to be typed in
The following data needs to be fed into the calculator: monthly income required after retirement, expected rate of inflation, the expected return on investment (both before retirement and post-retirement) and existing retirement fund (if any).
What the calculator will do
Once the above information is typed in, the retirement calculator will provide you with the following information – annual income required immediately after retirement, total corpus required after retirement and monthly savings one needs to make to build the required corpus.
Calculation with an example
Let’s take a concrete example. A youth of 25 begins retirement planning. He/she makes the following assumptions. Retirement would take place at the age of 60, or in 2059.
Life expectancy: 85 years. Monthly income required after retirement: Rs 1.5 lakh. Expected inflation: 6%. Expected return on investment till 2059: 12%. Expected return on investment after retirement): 8% Existing retirement fund: Nil.
Monthly investment now
With these assumptions, the calculator will tell you the following – annual income required immediately after retirement: Rs 1.38 crore and the total corpus required after retirement: Rs 27.56 crore. Now the operative part – you would need to invest Rs 42,851 every month to achieve this goal.
If you reduce the monthly income after retirement to Rs 1 lakh, the savings per month will drastically come down to Rs 28,567 a month now. Please note if you get more than 12% return on the investment that you make before retirement, the amount of corpus will go up. PPF, VPF, NPS, and ELSS are all instruments for retirement planning.
Everyone needs to engage in retirement planning from early in life. A retirement planning calculator can help you to get an idea of what to plan for. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
