Retirement Calculator
Planning for retirement is one of the most important aspects of personal financial planning. If one plans for retirement during working years, they can reap the benefits of investment in the retiring period.
Planning for retirement involves many assumptions about life expectancy, state of the economy, interest rates, and inflation, etc.
How to use Retirement Calculator?
The Retirement Planning Calculator asks the user to enter the following ten inputs:
- Present Age (Today's Age in Years): The user needs to enter his/her current age.
- Retirement Age (Age at when you will retire): The user needs to enter the age at which they intend to retire.
- Life Expectancy (Age till you are expected to live): The user needs to enter the age till which they expect to live. This age cannot be less than the retirement age.
- Long Term Inflation in economy (In %): The user needs to enter the long-term inflation expectation in the economy. Since the RBI MPC has an inflation target of 4% to 6%, it is advisable to take an inflation assumption between 4% to 7%. Sticky inflation (vegetable, education, etc.) should not be considered for retirement planning purposes.
- Present Living expenses/month (₹): The user needs to enter their present monthly expenses, which they would like to maintain during retirement to sustain their current lifestyle. For example, a 30-year-old user with Rs. 50,000 monthly expenses would require Rs. 2,16,097 at age 60 due to 5% annual inflation.
- Reduction in expenses after retirement (In % terms): There may be certain expenses (e.g., conveyance, office expenses) not required during retirement. The user may enter the percentage by which expenses may be reduced. If no reduction is expected, enter "0".
- Expected Return on Investment during working years (In %): The user needs to enter the expected rate of return on investments during working life. For equity investments (stocks, mutual funds), 10%-15% is advisable; for fixed income, 6%-9%. Unrealistic returns should be avoided.
- Expected Rate of return during Retired Life (In %): The rate of return expected on the corpus during retirement, typically from low-risk products (annuities, fixed income, government schemes) yielding 5%-7%. High returns should be avoided.
- Current savings for the retirement phase (₹): The user may enter existing savings for retirement, or "0" if none.
- Amount of retirement benefits at retirement (₹): The user should enter retirement benefits (e.g., EPF, gratuity) received at retirement, or "0" if none.
The Retirement Planning Calculator generates the following three outputs for the user:
- Per month amount required during retiring life: It shows the monthly amount needed to maintain the assumed lifestyle during retirement. For example, a 30-year-old with Rs. 50,000 monthly expenses would need Rs. 2,16,097 at age 60 with 5% inflation.
- Corpus Required at Retirement: It indicates the total amount needed at retirement to sustain a comfortable life until life expectancy.
- Investment Required per month: It shows the monthly investment needed to achieve the retirement corpus. A "0" result means current savings and benefits are sufficient, requiring no additional investment.
All calculations are carried out assuming end-of-period payments.