Retirement planning is financial preparedness for the period post retirement or when an individual stops working. The retirement planning process can begin from the day you receive your first salary. As we all know, inflation can erode the value of money. Therefore, you must invest in avenues that can fetch returns above inflation in the long run. This way, you can have enough finances to enjoy a desired lifestyle during retirement.
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What does retirement planning encompass?
Retirement planning includes:
- Estimation of expenses that will be incurred during retirement,
- Setting a time horizon for retirement,
- Gauging personal risk appetite, and
- Ensuring tax-efficiency of investments
Since life expectancy is continuously rising, you should ensure sufficient money will be available during retirement if you want to avoid dependency on children and relatives for financial needs. It is best to increase and improve retirement-related investment when your income rises. Avoid using the money set aside for retirement as you will miss out on the benefit of compounding.
What is a retirement planning calculator?
Fisdom’s retirement calculator is a useful online tool for estimating the approximate future costs of retirement. The calculator helps in simplifying retirement financial planning.
The retirement calculator designed by Fisdom helps you estimate the amount that you must set aside every month as savings to gather the right amount of the retirement corpus.
How to use Fisdom’s retirement planning calculator?
Fisdom’s retirement planning calculator, within a matter of seconds, will tell you the amount of annual income you will need during retirement, such that you can maintain your current lifestyle.
There are three components of the calculator:
- Income after retirement
- Savings before retirement
To know the cost of your retirement, enter below-mentioned details in the respective sections:
- Enter the current age in years either by entering the number or using the slide
- Enter the retirement age
Income after retirement
- Enter monthly income required post retirement
- Enter the expected interest rate on your investment (after retirement)
Savings before retirement
- Provide current savings per month
- Enter the amount of your existing savings corpus
- Enter expected rate of interest
The calculator will show the required corpus after retirement to earn the desired level of income per month post retirement. Additionally, it shows you the total amount of savings required per month to establish a corpus of the desired amount.
Why is a retirement calculator usefule
A retirement calculator can have a range of benefits, one of the most important ones is that it gives a clear direction to your future planning. Here are some of the other benefits:
- Easy to use: Using a retirement calculator is very easy as it only requires you to input certain parameters like age, savings, expenses, interest rate, etc to know the corpus amount that you will need during retirement and corresponding savings that you must have for the same.
- Know your cost estimates: A retirement calculator provides a fair idea of how much cost you will have to incur during retirement for maintaining a certain lifestyle and meeting your daily expenses. It is very important to know this number in advance in order to plan for your golden years
- Interest rate returns: Since interest rates keep changing, the calculator offers the flexibility to modify as per ongoing interest rates and know the changes in your retirement corpus plus savings corpus.
- Error-free planning: If you have to carry out a retirement calculation manually, it can be time consuming and may be prone to errors. With an online calculator, however, you can eliminate the mistakes and ensure thorough financial planning as long as you input the correct figures.
If you want to plan your retirement well in advance, make use of Fisdom’s retirement calculator today. Once you know the amount needed at the time of retirement, you can choose the right investment avenues, like mutual fund schemes, to start building your retirement corpus.
Inflation can diminish the buying power of retired individuals, thereby impacting retirement planning. By building a strong investment portfolio with inflation beating returns and setting a realistic retirement budget, one can deal with the impact of inflation
To invest for retirement such that you have sufficient corpus available for a comfortable retirement life, you must begin your investment journey as early as possible. Portfolio diversification, investing in avenues that offer inflation-beating returns, and allocating a maximum portion of savings to investment are some of the right ways to invest for retirement.
To know the amount of money you will need for retirement, you can use an online retirement calculator. It is important to consider current spending needs and lifestyle while estimating monetary requirements during retirement.
There are different avenues to invest for requirements, like equity mutual funds, National Pension Scheme, Public Provident Funds, etc. Investing your savings in these avenues can help in increasing the corpus by a substantial percentage and ensuring a comfortable retirement.
The 4% rule is used in retirement planning. In this, a retiree who has an investment portfolio comprising 50% each of equity and bonds can outlive the funds if only 4% of the investment is drawn every year, adjusted for inflation. It therefore states that the investments should be long term and must last for 30 years.