Retirement Planning

 

What is Retirement Planning?

 According to Investopedia , Retirement planning is the process of determining retirement income goals, and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, sizing up expenses, implementing a savings program, and managing assets and risk.

 One should have a fixed budget for retirement. One should start retirement planning a early as possible and they should also track and review their plan wisely.

                                                                                          

                                                                                      


                                                                                    

How to make an effective Retirement Plan?



Let us understand the same through an example:

 (You can get retirement calculator online)

ANSHUL'S RETIREMENT PLAN

Current Age

25

Monthly expense

179500

Retirement Age

50

No of years for retirement

25

Life expectancy

75

% expenses after retirement

100%

Inflation Rate

7%

Value of  monthly expenses post retirement

Rs. 9,74,224.16

No of years in retirement

25

Return on Corpus

8%

Corpus required to account for retirement expenses

Rs. 25,87,17,770.81

 

MONTHLY EXPENSE SHEET

Particulars

Amount

Groceries

5000

Fruits and vegetables

1500

Clothing

1000

Electricity

1500

Water supply

500

Medical expenses

1000

Medical insurance

2000

 Loans and interest

100000

Maintenance expenses

5000

Other insurance

2000

Education expenses

20000

Servant Salaries

40000

Total  monthly expenses

Rs.179500

 


Analysis from the preparation of Retirement Plan


In the above plan, assuming that I will start earning at the age of 25, it can be seen that monthly expense of Rs.179500 will translate into Rs.9.74 lacs at the time of retirement which needs a huge corpus or saving of almost Rs. 25.87 crores given the inflation rate of 7%.It also becomes clear that financial security is much dependent on proper and adequate financial planning. One also comes to know that the value obtainable for money will be far less at a future date.


                                                                       Conclusion 

 One can  even personally in order to maintain a similar lifestyle to their current lifestyle, it is necessary to begin saving for retirement as early as possible. So, when I will start retirement planning, generally 50%, 30%,20% rule is applied where 50% of the income goes to your needs, 30% for wants and 20% for savings.  One can  follow the same rule to make my retirement plan more effective.




Comments