Retirement Planning Calculator
A retirement planning calculator is a simple tool that gives you an idea of the corpus you can accumulate with a regular monthly investment from your income.
How does the retirement planning calculator work?
The amount required post-retirement can vary from person to person, based on factors like your current age, desired retirement age, and the amount you would like to invest each month or year. The retirement planning calculator uses your age and the amount you wish to invest and multiples it with a compounding rate to show you the exact retirement corpus you will be able to build.
For instance, if you are 30 years old and plan to retire at 60, you have an investing period of 30 years. During those 30 years, if you invest 10% of your annual income every year towards a retirement plan at an assumed 8% return rate, the retirement planning calculator will show you how much corpus you can amass by then. The younger you are, the more the compounding effect and the higher the returns you can gain.
Why should I have a retirement plan?
A retirement plan helps to ensure a stress-free and comfortable post-retirement life. It enables you to protect your future financial interests and ensure the security of your loved ones in case of an unfortunate event. It makes sense to start reaping the power of compounding early on and getting the most out of it by retirement.
What is a retirement corpus?
A retirement corpus is the total fund you accumulate to meet your financial requirements post-retirement. This should be a financial reserve you can fall on, that can not only cover your day-to-day expenses but also take care of unexpected emergencies.
Benefits of using retirement calculator
Using a retirement calculator helps in planning for life post-retirement.
You can assess how much post-retirement income will be enough to maintain your present lifestyle.
Provides financial clarity on how much income you will have post-retirement.
Helps you consider the effects of inflation and compare different yields earned through varying interest rates.
You can see how much corpus you can earn at 4%, 6%, or 8% rates per year and compare the returns yielded by different retirement plans.
3 Quick steps for Retirement Planning
Before you use a retirement calculating tool, you need to first assess some factors at your end. To simplify the process, follow this quick 3-step approach:
Note down your present monthly or yearly expenses. Add everything you spend your money towards – groceries, bills, utilities, loan repayments, and so on. Keep this amount aside. Note down how much you save. Now, envision how much you will spend on these expenses once you have retired.
Once you have an approximate amount, multiply it with the inflation rate during your retirement age. Let’s say, the inflation rate will be 6%. So, the additional post-retirement expenses in the next year would be = annual expenses x inflation rate (6%). Let’s put this in numbers to explain this a bit better.
Let’s say you retire at 60. The average life expectancy rate at birth in urban India is 72.6#. Now, let’s say your annual expenses at age 60 are ₹ 4 lakh per year. With inflation, they will keep increasing each year. So, from the age of 60 till age 72, assuming a 6% rate of inflation, your annual expenses will look like:
|Assumed Inflation at 6%||24000||25,400||26,966||28,584||30,299||32,117||34,044||36,087||38,252||40,547||42,980||45,559||48,293|
|Total money accounting for inflation needed next year||4,24,000||4,49,440||4,76,460||5,01,991||5,35,290||5,67,408||6,01,452||6,37,439||6,75,792||7,16,339||7,59,319||8,04,879||8,53,171|
3 simple steps to use ICICI Prudential’s retirement calculator tool
Once you have a rough idea of how much post-retirement income you will get, you can assess how much you should set aside to invest in a retirement plan. Here is where the retirement calculating tool will help you.
*The calculations mentioned above take into consideration an assumed rate of 8% and 4%. This calculation is generated on the basis of the information provided and is for assistance only. And is not intended to be and must not alone be taken as the basis for an investment decision. If the policy offers guaranteed returns, then these will be clearly marked "guaranteed". Since the policy offers variable returns, the given illustration shows two different rates of assumed future investment returns. The returns shown above are not guaranteed and they are not the upper or lower limits of what you might get back, as the maturity value of policy depends on a number of factors including future investment performance.
Unlike traditional products, Unit linked insurance products are subject to market risk, which affect the Net Asset Values & the customer shall be responsible for his/her decision. The names of the Company, Product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns.
#SRS based Abridged Life Tables 2014-18 - https://censusindia.gov.in/Vital_Statistics/SRS_Life_Table/SRS%20based%20Abridged%20Life%20Tables%202014-18.pdf