Retirement can be heaven or hell, depending on whether you are financially free or not. If you attain financial freedom, there is nothing like post-retirement life since it allows you pursue goals or aspirations that your work/career never gave you the opportunity to pursue – like going on a trek, or stay in a log cabin in the mountains or go on a drive around the country.
But it all depends on how much you have saved during your career to build a sufficient pool of funds at 60. However, merely investing blindly is not sufficient. One must know how to proceed towards investing. Towards this end, let’s turn to a retirement calculator. It is a tool that helps one to estimate what they would need to save/invest for retirement. It also helps one to estimate the money they can receive from their investment at retirement.
Healthcare expenditure, housing expenditure
To begin with, one must estimate one’s expenses, which can include healthcare, housing, conveyance and sundry living expenses (food, grocery, utility bills, socialising etc). This estimate is extremely important as it will determine the quantum of savings you would need to make now.
For example, let’s take the example of a person who has a monthly expenditure of Rs 50,000 and is now 35 years old. Let’s make two other assumptions – one, that he/she would retire at 60 and would live till 80. Let’s also assume that 75% of the expected expenditure can be retirement expenses. Let’s think that retail (consumer price index-based) inflation can be 6%.
Fund requirement calculation
With all these information/assumptions, the retirement calculator will tell you that this person would need a retirement fund of Rs 3.19 crore – actually Rs 3,19,27,951. Most important, to reach this goal, the individual has to invest Rs 33,572 every month.
A very important lesson from a retirement calculator is that if you find it difficult invest this amount of money every month, you should cut corners to reach this figure. Another important issue is that one must calculate all the potential sources of income after retirement such as rental income, pensions from government/NPS (National Pension System), annuities etc.
