Retirement Calculator- How Much Do You Need to Retire?
As you plan to retire, your responsibility to your workplace might end, but your responsibility to your family never does. A lot of people do not factor in all arrears before retirement; perhaps they save a little too less or simply do not save properly at all and hope pension gets them through the rest of their lives.
Unfortunately, due to this bad retirement planning, you and your family will have to inevitably face a drop in your quality of life. If you love the quality of life you’re living right now, make sure you do the following in order to maintain the same till your last days.
- Use Pension Wisely-
You should take your pension into consideration from about two years before you retire. There are a dozen pension calculators in the internet sea that help you do this. According to Indian Government guidelines, you’ll be eligible for pension for your next ten years.
The maximum pension you can have as a Government employee is Rs 45,000 which is barely enough to cover the expenses of a big family. Retirement planning begins with calculating pension with a pension calculator so you can figure out your next steps.
- Factor In Loans, Rents And Other Payments
Go back and read the title. The title asks the question ‘how much to save before retirement?’. This means, if you’re working hard and simply paying off your debts as you retire, you will have a very bad time trying to stretch pension over your daily life. Going forward, we’ll tell you what you should factor in while saving for your pension but that can’t be done if you have standing loans and other debts to pay off.
Try to pay off your debts while you are working with a little to spare. If you do not earn enough to do that, use other business tactics to help you out. (A smart person will not leave his earnings only to his salary, perhaps the next point will help you out).
- Invest Early And Invest Wisely-
If you play your cards well, retirement planning can begin from as early as you start earning. Start investing at least 30 years before you retire. Explore as many options as you can and take minor risks (given that you have a back-up plan). Do not feel disheartened by looking at the small returns these might show you. Over time, these small returns will accumulate into a fortune.
Investing in bonds is considered extremely safe for both beginners and the veterans. Stocks, despite running a minor risk, will give you good returns over longer periods of time, even if they mean facing losses in the near future (given you’ve done your research on where you are buying stocks). Mutual fund is also something that might interest you. Use the pension calculator and find out if you can keep getting the same returns post retirement, as investment returns ignore age.
- Term Insurance And Health Cover
These are two important factors in retirement planning. Simply hoarding all your money in a savings account might not be the best use of money. We do not have to remind you how much money some ailments can pull away from your bank account. It is always wise to have someone else pay the hospital bills for you in exchange for an acceptable premium. Similarly, term insurance helps sustain your family in an uneventful death. Plan your insurance such that, the pension that you’ll be earning (which you can find out using a pension calculator) can also help pay your future premiums.
All this brings us back to the question- how much do you need to save?
You’ve planned your retirement planning by taking care of all the things above. You’ve used a pension calculator and now you think you can live off your pension and investment income. Now, how much do you need to save so you can earn more using your interest income? How much money you’re spending now will probably be enough during your retirement days. However, do not forget to subtract expenditure due to inflation that will come in the future years. For good measure, assume an inflation of 6.9%.
Amount Required For Retirement Living = Pension Income + Investment Income (if any) + Interest From Savings Account + Any other source of income ( rent payments etc.) – Expenditure(Yearly or monthly) – Money you will lose due to inflation – Premiums for your insurance policies.
You can use a complete retirement planning calculator (which comes with an in-built pension calculator) to save you the trouble of doing everything on paper.