A retired life leads to a life of peace for some while distressing for others. It all depends on the weight of money in your pocket. With the cut-off of a regular wage, the living standards may get hampered. However, you can manage it with smart strategies of retirement savings calculator. Thus, in this article, we’ll discuss how much money you need to retire from job and calculate it.
How To Calculate The Amount Of Money You Need To Retire From Job?
Retirement is nothing avoidable that you need to neglect every time. It is just like your family planning that you need to plan. The earlier you make plans, the stable and concrete it stays. In short, the retirement has a base which is made up of two layers-
- How much you earn?
- How much you spend?
If your expenses exceed your earning, then you better know if you can save or not. Thus, it is always a good idea to keep a latch on your expenses.
Apart from that, the age at which the idea of savings strikes your mind also broadens up your future fund. Let’s take an example that will clear your thought.
Let’s say your friend starts saving at the age of 30. While you started saving at 25, after joining the job itself. Both retire at the age of retirement. Who do you think has more savings? Don’t take into account any emergency withdrawals if made from that savings account.
Thus, now, you must be sure of the fundamentals that you must keep in mind for a smooth retired life. So, let’s focus on what’s more you need to keep in mind.
Strategies To Calculate The Amount Of Money I Need To Retire From Job
Mentioned below are the few points that you need to keep in mind for your future fund calculation-
1. Calculate Your Monthly Expenditures By Splitting Into Two Parts:
This will be your first step where you need to list out your average monthly expenditures. You need to keep a note of the things you’re deviating your bucks into. However, before that, let’s divide the stream into two parts-
- The expenditures that will continue even after you retire.
- The expenditures that will cease after some point in time.
The former one includes your casual expenditures like your grocery items, electricity bills, regular petrol expenses, etc.
These expenditures continue to function throughout your life. Rather, these are the basic amenities that you need in your day-to-day life.
The latter includes your rental fees (if any), house maintenance charges, phone bills, your children’s education fees, loans (if any). This funding come to a halt after a specific period. That is, your children’s education funding may stop after years. Added to that, your home loan may stop debiting from your card. So, in short, you need to add up every single debit of funds from your account every month. It’s often marked that after retirement, there’s an increase in the travelling expenses.
However, it’s important to keep your scale a bit high than what range it’s prevailing now. That is, almost every month, the price of things keeps on increasing. Apart from that, it’s certain that there must be an extra expenditure on medical health in the future. You can even see in your nearby environment that everyone is facing some or other health issues. No one is perfectly fine in today’s world. Thus, it’s a smart idea to range up your current expenditure calculation scale.
For example, if you’re calculating your current grocery bill as Rs. 6,000 per month now. You must round up to a count of Rs. 10,000, considering future inflation.
2. Calculate A Rough Monthly Wage That You Would Get After Retirement:
Here, you need to pen down the total amount that you would get after you get retired. This may include your rental income, retirement funds, mutual funds, insurance schemes, EPS funds, etc.
Apart from that, you can also include any properties that you intend to sell. Added to that, the value of these properties might rise at that time. So, by this, you can raise your income levels as well.
Yet, you must consider the salary that you expect to receive before 2 months of your retirement. Based on that, you might get a rough estimation of how much pension amount you might receive.
3. Calculate The Extra Amount You Require To Meet Your Monthly Needs:
Now that you have calculated a rough amount that you may receive after your retirement. You might estimate the extra amount that you need to meet your expenses. For instance, let’s say you expend a total of about Rs. 40,000 per month. However, after retirement, you might not get a lump sum as you were getting while on the job. Thus, let’s say it is Rs. 25,000. Hence, you need an additional amount of Rs. 15,000.
4. Add The Inflation Rate To Your Additional Future Amount:
The additional amount requirement after your retirement may seem small now. But, you can estimate by asking your father how much he had to spend on groceries during his time. Then, you can compare it with your monthly devotion to the grocery. You can see about 25% or more increase in your current grocery expenditure.
Added to that, in the present scenario, inflation is less than 3%. Yet, when you’re considering this for the future, it’s better to round up to 6%. That is the double of what is prevailing now. It is always better to have something extra in your hand than lacking the needful. Apart from that, there is a formula by which you can get an approximate estimation.
Approximate future value estimation = The net extra amount you need* (1+rate of inflation)^total number of years left for you to attain the age of 60 years.
Let’s take an example to make it more clear. Let’s say you are 45 years of age, and the inflation rate is 3%. So, you’ve 15 years left to attain 60 years of age. You need an additional Rs. 30,000 to meet your requirements. Let’s calculate considering this information.
Approximate future value estimation = 30,000* (1+3)^15 = 30,000*(4)^15
5. Find A Rough Estimation Of The Amount You Need At Your Retirement Age:
It would be quite absurd to make an accurate calculation about how much you would expend. However, you can certainly make a rough note of the things you want now and in the future. Then, calculate the amount, adding up the inflation rate, and making a rough estimation.
Currently, people get retired after crossing 58 years of age. Yet, people can even opt for early retirement or increase their retirement age by two years. Thus, neglecting the early retirement, let’s round up the current retirement age to 60. Here, I have neglected early retirement since people opt for it in their own choice. Moreover, for that, they need to frame a prior concrete plan. It has a whole volume of concepts in itself. So, let’s focus on what we’re discussing.
Considering the retirement age to be 60 years and an average lifespan to be about 80 years. You need an additional 20 years of funds for which you may not have a regular income. It directly depends on how effectively you have saved for your future. Apart from that, it is always better to have an extra in your hand than lack its presence. In other words, you must be carrying an extra pen with you to the exam hall even if it’s not used. At least, it would save your time and exam paper from getting ruined. Likewise, it’s better to keep an extra fund in your hand.
Some people carry the thought of restricting themselves from all investments related to equity and debts. Yet, considering on a long-term basis, you can understand the actual scenario than the one you’re living in. With increasing age, there would be more funds needed for health care needs. Some even devote a non-negotiable amount towards travelling. These things require funds. Is your retirement fund enough to meet these?
No, right? You need to invest in other profitable fields than your retirement fund contribution. There are many such fields like rental income, mutual funds, savings account, etc.
A small return now can add up to create bulk in the upcoming years. Apart from that, if there is no such risk involved, then why not go for it? Added to that, the experts have framed a thumb rule for retirement fund calculation. According to it, you have to subtract your age from 100 and devote the rest in equity investment. That is, when you attain the age of 70, you must devote 30% of your capital to equities.
Yet, it’s important to note that investments in equity funds may or may not generate profits. Thus, you must go for long-term speculation. Statistic says there is even a chance of about 12-14% profit in your long-term investment.
6. Compute How Much You Have Gathered In Total:
It may include your retirement fund, which may be in the form of EPF or PPF or NPS. Apart from these, there are even many more investments which you may opt for. Make a rough sum of these investments and keep aside. These are your retirement funds that decides how much you need extra for your regular expenditure. Mentioned below are a few investment options that you must opt-
- Mutual Funds
- Pension Schemes
- Equity and Debts
- Insurance Schemes
- Savings Account in Banks, etc.
7. Compute How Far Your Investment Grows:
The investments you made must be in different fields. Isn’t it? So, different fields must have a different mode of calculation and rate of interest. Considering all these factors, you must compute a total of how much you’re entitled to receive. The more you’ve invested, the more you can expect to receive.
For instance, currently, the PPF interest rate is 8.5%. So, you can calculate how much you can get if you’ve invested a certain amount. There is even a formula for easy calculation.
Future approximate value at your retirement age = Present corpus*(1+approximate return)^remaining years to attain the average life expectancy.
For example, we’ve come across equity funds that provide an approximate return of about 12%. Let’s assume your age as 60 years and your current corpus as Rs. 1 lakh. So, you need to subtract it from 100, and we get 40. With this information, let’s compute.
Future approximate value at retirement age = 1,00,000*(1+12)^40. This yields up to Rs. 18 lakh approx.
8. Then Based On Your Monthly Expenses, Estimate A Rough Average Of The Extra Amount You Need:
After you compute your total retirement fund, you need to subtract it from your total monthly expenses. On behalf of that, you can know how much more you need to mend an easy flow on your expenses.
9. Based On The Extra Expenses, Estimate The Minimum Extra Amount You Need To Save Per Month:
By now, you must be sure of how much more you need extra per month after retirement. Therefore, based on that, you need to make your monthly savings. For instance, these days the youngsters get a headache when they get an average need of about Rs. 80-90 lakh. Let me tell you, for a youngster between the age group of 25-30 can make about 1 crore or more with a few smart tactics. Mentioned below is a rough table showing how much you need to keep aside.
However, it is better to start saving as soon as you get a job. The earlier you start bearing a conserving mindset, thicker the amount you get.
10. Finally, Sum Up The Total Investments You Made:
Finally, sum up all the investments you’re still making. Add up all those investments and from that, deduct the amount you got in the last point. By this, you can know how much more you require to meet your future needs. After getting that, you can figure out what other means you need to focus on meeting the financial needs.
If you have a risk-bearing capability, you can invest a certain amount in the stock market. Otherwise, you can sell any of your properties you’re not using currently or rent it to get a rental income. Added to that, you can even pursue your dream job or get into following your passion. This might engage you in some real work and even keep you distracted from the ‘worldly old age tantrums.’
Disadvantages Related To Retirement Savings
Although the disadvantages won’t match the advantages, still let’s know a bit about it. For that, we need to divide into three age groups-
During this age, people usually get into new jobs. They shift from spending their ‘parents’ money’ mindset to a regular earning. But, since they got into these things newly, they would take time to adapt.
Some can even relate to this fact that new employers somewhat get a small income. From it, devoting so much can be quite strenuous.
If you belong to this age group, you can easily relate to the situations you’re facing now. This is the age of the family building and utmost devotion towards them. Plus, bearing children and their responsibilities pose a tedious stark at your savings. These are even too important to neglect.
Within this age-group, you have a meager time for your future planning. Thus, if you belong to this age-group, make sure you start a strict savings attitude at the earliest. Even at this age, you might have to devote a considerable amount of your income to the basic amenities. There might be educational, financial demands, marriage requirements, etc.
Apart from these, a health issue demand is common in every age group. It’s the most pivotal and can even extract your entire savings in one go. Thus, it’s better to make a life insurance policy.
However, in every plan you pursue, the utmost determination is what you need. If you have a strong mindset, you can certainly pave your way out.
Focus More On Your Expenditure Than Salary
The points that I have mentioned above levies to every range of workers. Salary ranging from Rs. 20,000-Rs. 1 lakh per month must take care of it. You must focus more on your expenditure than salary. Let’s say you earn Rs. 30,000 per month. From this, if you intend to save about 50% of your salary, compute if Rs. 15,000 is enough for your family or not. Yes, it’s likely for a person earning Rs. 1 lakh to keep aside 50% of it. Rs. 50,000 is somewhat adjustable for a normal family. But, the situation is not the same as the person earning less.
At the age of your retirement, i.e., 60 years, your children must be grown-ups. They would be capable enough to meet their own needs. Thus, on a broad view, you need to save for what you and your wife need if she’s a housewife. However, uncertain medical treatments may extract hugely. Still, that is inevitable.
Thus, you must give more focus on how much you spend on things than how much you earn. You can impart your savings nature on saving more on your expenditure than how much you’re saving.
In a recent consumer disclosure, it was reported that the curve of salary has sunken with about 1.5%, with a rise in 4.8% expenditure. The maximum contribution goes towards the retirement fund, savings account, etc.
Hence, summing up, you must pay more heed to how much extra and unnecessary you’re spending on. Computing your calculations based on your salary is not fruitful unless there’s a strong latch on your expenditures.
How To Cope-Up With Future Savings If I started Late?
Starting late is just similar to finishing home-work in the last 5-10 mins. During this time, it is understandable that one would get despair. Yet, it’s important to keep control of this desperation to avoid any mistakes. Often people make blunder during desperation. So, stay calm and go through the points below to know how to cope up-
i. Save More-
Since you started late, you need to keep aside a thick amount from your basic wage to meet the loss caused. You can estimate an approximation yourself about how much you could have saved in the last few years. Since you couldn’t, you can still hope for the best. There wouldn’t be much difference except that, in place of Rs. 5, you need to keep aside Rs. 10.
ii. Stay Diligent-
It is one of the most important factors in every investment you opt for. Taking up a task in hand now and loosening up its thread can ruin it in the long-term. You may not realize when you would be at the end of the cliff and no time left to save. Thus, it’s better to give a strong head towards saving than ceasing after some time.
iii. Utilize Index Pool-
Keep looking for risk-free investments and invest whenever you get a chance. Keep in your mind to store about 25% or more the amount you are expending now.
iv. Make Use Of The Retirement Calculators-
You must mark an approximate amount that you’re entitled to receive in the future. Based on that, you can make your current predictions regarding how much you must keep aside.
Confidence comes from clarity in every aspect of life. Handling finances is not much different. Inflation, government regulations, investments, and savings are the defining factors for a secure financial future after retirement. So, by now, you must be sure of how secured financial support is essential once your regular wage comes to a halt.
Hence, it’s safer to get a rough calculation of your financial scale for what you’ll be getting in the future. Whether a self-employed or salaried employee, the calculator, as mentioned below, covers everyone. So, let’s get a glance at it and get broader views with an example.
How Much Do I Need To Save Per Month To Retire?
A pleasant retirement plan is not an impossible task. To know your return rate, you need to opt for a retirement calculator. To make understanding more clear, let’s take an example. Let’s say your age is 30 years, and the round-up retirement age is 60 years. An average lifespan is taken as 85 years. Monthly expenses let’s take Rs. 50,000, and your annual expenditure towards health care is Rs. 1 lakh.
Thus, you might require about Rs. 4.5 crores after your retirement. Yet, comparatively, the monthly contribution is the smallest. So, you can choose one best for you and go for it.
Benefits Of Retirement Calculator
There are various reasons why one should go for a retirement calculator. Kindly go through the points mentioned below to know more about it.
1. The main motive of the retirement calculator is to give you with a rough idea about the amount you need to save for your retirement. This amount can sum up at the end of your service period, forming a bulk. You can know an approximate estimation of the total amount you have invested. Based on that, you can calculate how much more you need to add up to meet your future demands.
2. It even provides you a list of secure investment options. There are various options under it. You can choose which suits you the most.
3. You can get a list of the plans most people opt for. From it, you can decide on what you want to go for, based on your passion. However, you must opt for the one you can continue working for about 8-10 years.
4. With this calculator’s help, you can also get a glimpse of the list of strategies from which you can choose what to opt for. Based on that, you can choose the one best for you.
5. If you have already planned a life after retirement, you can make an additional earning then. For instance, if you start practicing in a court after your retirement, you can easily earn bucks.
6. Apart from everything, the calculator is easy to usage. You just have to put the value and get the answer. That’s it!
7. Finally, you can go for this calculator to speed up your calculation process. Added to that, you can even use it to finalize important aspects as future investment options. You can always rely on machinery calculations than manual. Be it accuracy or time saving; machinery implements are always favourable.
Now that we have discussed almost every aspect related to retirement fund calculation. Let’s know what are the different retirement schemes suitable for us.
Best Retirement Schemes
Mentioned below are some of the best retirement schemes that you must opt for. These are quite common among almost every citizen and provide a lot of returns.
1. Mutual Funds-
Starting from young teenagers to adults, everyone can go for mutual funds. It is one of the most preferred investment options among people. All you have to do is maintain a regular contribution to your investments. Apart from that, the bank you choose also plays a great role. You have to keep an eye on the prevailing market conditions and choose the best bank.
Make sure the bank provides a high-interest rate along with the risk-free procedure. Added to that, you can also tie-up with the SIP to increase your returns. As we know, the equity funds are quite risky. So, most people do not opt for it. Thus, a mutual fund is a better option.
2. National Pension Scheme-
The first and utmost pivotal thing that adds to its risk-free nature is it’s in the hands of the government. You can invest in it during your service period. The features provided by the NPS is extraordinarily awesome.
As per NPS, you can receive about 60% of your entire retirement fund. The rest is used for annuity purchase. Thus, if you’re a subscriber of this scheme, you can get a lifelong pension after your retirement. Added to that, it also provides various fascinating tax-free benefits.
3. Public Provident Fund-
It’s a safe option with loads of advantages. Added to that, it is a long-term scheme that further proposes a higher return. The rate of interest provided by it is even quite high. Currently, it’s stuck at 7.1%. The discount in tax also adds to its advantages.
Apart from that, the withdrawal you make at the time its tenure ends is tax-free. Yet, you can even extract from it before the end of its tenure during emergency conditions.
4. Employees Provident Fund-
It is also known as EPF and controlled by the EPFO, i.e., Employees’ Provident Fund Organization. It is also a kind of retirement benefit specifically for the salaried section. You have to devote about 12% of your basic wage towards it. You can extract from it only when you’re jobless or after retirement. However, you can even appeal to withdraw from it during emergency conditions.
5. Atal Pension Yojana-
This scheme is specifically framed for the workers in the unorganized sector. There is a requisite age criterion that you need to fulfill to get into it. That is, you have to be in the age group of 18-40 years. It has about 5 different schemes under it with a contribution amount ranging from Rs. 1,000-Rs. 5,000. However, you must invest in some other scheme along with this and not be entirely dependent on it.
6. Fixed Deposits-
When safety is your main concern, then note that it’s the more secure option. Added to that, the tax-free benefits under it adds to its advantages. Almost all the banks provide an option of fixed deposits. Some may offer a little higher interest rate than the other. You have to choose the one with the best option.
7. Real Estate-
It is one of the most preferred investments among the oldies. They can either rent their property and enjoy the rental income. Otherwise, they can even sell and enjoy in a small house with a big bank balance from their old property.
Let’s go through the tabular data to know the pinpoint details.
Retirement Schemes Based On Different Age-Groups
Saving up for the future needs utmost diligence and continuity. It is always a smart choice to build up the ideology as soon as possible. As I’ve mentioned, the sooner you start, the smaller you contribute, and the larger you get. However, if you started a bit late or more, there are still ways. You just have to choose your age-group and go for the points mentioned. Let’s have a look.
i. Age-Group Of The 20s:
People under this age-group are mostly newcomers into the world of monotonous career. Their mind during this time is mostly frolic and spending. They intend to enjoy their new life with their own money. Even if some save-up, they do that for a short-term period. The cause may be for a trip with their friends or car or any such thing.
However, if you broaden up your thoughts during this time regarding future needs, you can cope up. All you need is to contribute something into your piggy bank and simply forget about it. You have to do it diligently and maintain the continuity. Savings as small as 5% of your income is adequate at this age. Yet, with the increase in your income curve, you must raise your savings percentage even.
ii. Age-Group Of The 30s:
Most people of this age group start devoting a considerable amount of their salary towards future savings. However, some may be diligent and continuous while some may not. The main barrier they face during this age is the burden of family building and children raising. A considerable part of the income gets devoted to them. The rest get devoted to future savings.
However, it is better if, at this age, you keep aside at least 10% of your income towards it. With the increase in salary, you can raise the contribution percentage. You can even earn from other sources like rental income.
iii. Age-Group Of The 40s:
At this point in the stage, even though it’s a bit late, still you can cope up. For that, you need to increase your savings percentage by 15% for the future. True that this age is the zenith of expenditure. Still, you can compute your expenditures and keep a stake at it.
iv. Age-Group Of The 50s:
At this point, if you haven’t started saving, then it’s high time for you to begin. You still have at most 10 years to frame your future financial needs kit. Your children must be on their way of life building, and thus, there would be expected less expense. Thus, you can easily contribute at least 20% or more towards your future financial needs.
v. Age-Group Of The 60s:
This is the stage of retirement. Almost 90% of people accept retirement at this stage. Only a few start their way to catch-up their passion building or get on a side-way job. Now, since your regular income would have ceased, you can only focus on other ways of income. It can provide mutual funds, rental income, etc.
Frequently Asked Questions
1. What is the importance of the Retirement Calculator ?
i. It provides you with different combinations of plans to compare and choose the best.
ii. The retirement calculator breaks your sum into small installments making it easy to invest.
iii. It considers the risk percentage and pattern of spending while providing you suggestions.
Retirement Calculator is a one-stop solution for post-retirement financial solutions. It requires minimal yet efficient management of time and leisure.
2. How do you calculate how much money you need to retire?
By the process of compound interest, you can know how much you’re entitled to receive at the end of your tenure. You need to put up the values under each criterion and it gets compounded.
3. What makes the Retirement Calculator appealing?
i. It is completely automated process and simple to use.
ii. It has a standardised formula and regulations that are used for the calculation to avoid discrepancy.
iii. It is updated with market norms.
iv. It gives you a helping hand in long term speculation planning.
v. It is always available.
4. How much money do you need to retire comfortably in India?
Most people worry up thinking they need a huge amount to reside after retirement. They still count their kids’ necessities in their list.
Thinking about it you can know, during that period your children would have become self-sufficient. Thus, you need an amount equivalent to the survivability of you and your wife. Added to that, if your wife is also working or retired, she can contribute equally to the contribution.
Thus, in short, you need to multiply about 25-30% of your expenditures now and save for the future.
5. What is the average amount of money retirement have saved?
As per the experts, you must keep aside at least 25% more than what you’re expending now currently. Due to inflation, the market price and survivability needs may enhance. To meet these, you must increase the savings amount even. Thus, if you’re expending about 7 lakh towards it annually now, you need at least 4.5 crores after your retirement.
The calculation made above is based as per the retirement calculator in the article.
So, by now, you must be aware of how much you need to keep aside for your future needs. As per your age-group, you can choose the best scheme, get an approximate calculation and make the necessities. I hope, I was able to clear all your queries related to how much money do you need to retire from the job and how to calculate.