When i asked young person (late 20’s or 30’s) who is earning decent salary about retirement plan, i got responses saying that Why do i think of retirement at this stage, Let me enjoy my life now and i will think about retirement when i will be reaching late 40’s. Is it correct? Just go on read why you need retirement planning from starting of your career and how much amount you required for your happy retirement and how to generate corpus for retirement.
Why Retirement Planning is important
1. In previous generations, children used to take care about parents. Now things are changed and we are seeing many parents are staying in old age homes. So next generation onwards, the average of kid s taking care about parents will drastically come down.
2. When age increases, we must need high medical expenses. So if you are not well planned your retirement what about your medical expenses.
3.Living expenses will be very high after few decades and Inflation eats your savings. So you must need to save huge part for retirement.
4. We in India , still developing country , It is your responsibility to take care about your retirement wherein US ,government will take care.
5.For everything we get loans (education loans, home loans, personal loans etc), but there are no loans for retirement at that old age.
6.Earlier days, at least government employees used to get pensions , but now no pension are given by govt , Its your responsibility to plan your retirement corpus.
How much money needed for retirement
Well, now you understand the importance of retirement planning, and now question is how much is needed, it is depends on below factors.
1.Your current age
2.Your planned retirement age–when you are planning for your retirement , age of 55 or 60 years.
3. Current living expenses including house rent, food charges, bills, traveling charges, maintenance charges.
4. Inflation rate.
5. Returns on your investment.
If you are 30 years and planned for your retirement at 60 years, Then years left for your retirement is 30 years. If we take average living age is 80 years, amount you saved for your retirement is to survive you for 20 years ( compete retirement stage from 60 years to 80 years). Currently, your living expenses are 20k per month including house rent, food, bills, maintenance. I am considering inflation s 8 % and returns on investment as 10 % .
Present annual expenses (20000 *12) = 2,40,000
Considering inflation of 8 % , your annual expenses at retirement is= 24,15038
The Total Amount of Savings Required to maintain Current Life Style Rs.40059767
To reach this goal, you need savings of Rs.20294 per month.
Use this Retirement calculator to find your retirement amount needed and how much to save per month to reach that goal. In this calculator give values are zero at “Asset calculation”. Because you might be planned your ppf or other assets for another financial goals.
How to generate that amount for happy Retirement
Now you know how much you need to invest per month to make your retirement life happy. So , now question is where to invest. As i always mention use balcacned portfolio, dont invest everything in on financial product. Always spread your investment into multiple investment options. You can see differnt investment options in my earlier article “Top 10 Investment options to make your money grow“.
For salaried people, EPF helps us in generating little amount for retirement corpus. You can also see “How EPF (Employee Provident Fund) makes you Rich“.
Though you have many other goals like home, children education, children marriage, trips, treat retirement planning as another important goal. Plan your retirement and lead happy life style after retirement as well. Let me know your comments on it.