The actual amount of monthly savings will depend on the number of years remaining for retirement.
Saving for retirement is viewed by most of us as the most ignored financial goal. While some may have realized the importance of saving for retirement, procrastination is a worrying factor. However, if you are seriously thinking about how much retirement money you need, here is a simple roadmap to retiring rich. There can be different storage methods. However, you need to start saving systematically and create a monthly savings plan.
The process of regular saving is what the Systematic Investment Plan (SIP) is all about. A SIP calculator for retirement can help with this. Otherwise, there are SIP calculators that can help you calculate how much you need to save. You can start saving ad hoc and save any amount every month. The bottom line – you could save a lot less than required, or save more! Instead, do an educated calculation and use SIP calculators to figure out how much you need to save.
You can start saving ad hoc and save any amount every month. The bottom line – you could save a lot less than required, or save more! Instead, do an educated calculation and use SIP calculators to figure out how much you need to save. One of the important investment tips is to start saving after calculating the target’s inflation-adjusted amount, rather than saving for the target’s current cost.
There are five easy steps to learning how much to save for your retirement after adjusting your current household expenses for inflation.
Step 1: As a first step, use your current age to check how many years you have left to retire.
Let’s say you are 35 and there are 25 years left to hang your boots.
step 2: In the second step, you will receive a rough estimate of the monthly expenses that you will have from the age of 60 until you leave for the unknown destination. This could be difficult as it could be difficult to predict post retirement needs. Your medical travel expenses may go up, while some go up or down. And then there is inflation in the retirement years. With increasing life expectancy, thanks to medical advances, you don’t want to underestimate your requirements.
Here is help. Take 80 percent of today’s household expenses as your post-retirement expenses. If your current monthly need (80 percent of today’s cost) is Rs 50,000, you need to figure out how much it will be worth after 25 years.
step 3: In the third step, you need to increase the monthly expenses. The monthly household costs, assuming inflation of 6 percent per year, amount to almost Rs 2 lakh per month from the age of 60.
In simple terms, today, if you are 35 years old and have Rs 50,000 monthly expenses, after 25 years, by the age of 60, you will need 2 lakh per month to cover the same household expenses!
Step 4: The fourth step is to find out how much you need to save to cover the costs after retirement.
Assuming a return of 6 percent on the corpus after retirement, you need about 4 billion rupees corpus to receive 2 lakh per month from the age of 60. The risk of inflation and reinvestment after retirement is not taken into account here.
Step 5: In the fifth step, you need to see how much you need to save to accumulate an Rs 4 core in 25 years.
Here comes the role of a SIP computer. With the SIP calculator, a 35-year-old must save 21,000 rupees every month for 25 years, assuming a growth rate of 12 percent, to create a corpus of 4 rupees.
To meet the monthly inflation-adjusted requirement of Rs 2 lakh per month, Rs 4 crore at 6 percent will be the required amount.
For 30 years old
For someone who is 30 years old, they must invest Rs 17,000 each month to create an approximate corpus of Rs 6 crore by the age of 60, assuming an annualized growth rate of 12 percent. The corpus of Rs 6 crore will be enough to meet the inflation-adjusted monthly need of Rs 50,000 (based on today’s costs) after retirement.
For 40 years old
For someone who is 40 years old, they must invest Rs 38,000 each month to create an approximate corpus of Rs 3.8 crore by the age of 60, assuming an annualized growth rate of 12 percent. The corpus of Rs.3.8 billion will be enough to meet the inflation-adjusted monthly requirement of Rs. 50,000 (at today’s costs) after retirement.
Above is a simplified version of the steps required to determine the monthly savings. You should sit down with your financial advisor to do some math based on a more refined version that takes other aspects into account.
The actual amount of monthly savings will depend on the number of years remaining for retirement. If you are young with more years to retire, then there is good news for you. With more time, you have to save less than someone who is about to end their working life. This is a very big benefit for teens and the sooner you realize it, the better it is for them.
Get live stock quotes from BSE, NSE, US market and current net asset value, mutual fund portfolio, read the latest IPO news, the best IPOs, calculate your taxes with the Income Tax Calculator, you know the top Gainer, Top Loser and Best Equity Funds in the market. Like us on Facebook and follow us on Twitter.
Financial Express is now in the telegram. Click here to join our channel and stay up to date with the latest news and updates from Biz.