Calculate Retirement Fund

With the growing inflation the post retirement financial planning is desired by many but most of us wants to dig deeper for retirements funds calculation.

What are your current major expenses and what will you spend on in retirement?

Add up all your monthly expenses leaving work related once like travel, food, etc.

Suppose this comes out to be 50,000 per month (Assuming you will have your own home prior to retirement)

The yearly expense comes out to be Rs 6,000,00

A : Rs 6 lakh

An illustration

List your possible sources of income post-retirement

Let's assume it would be Rs 0

B : Rs 0

Your options could be pension, income from rent, any other sources.

Final annual requirement at current cost

A ( Rs 6 lakh) Minus B ( Rs 0 lakh) = C ( Rs 6 lakh)

When do you want to retire?

Retirement Age : 60 years

Saving Start Age : 25 years [This is the age you started service\saving]

Years of Saving : 35 years

D : 35 years

Factor in inflation of 6% per annum

This is based on years left for retirement

Based on 35 years, this is 7.69

E : 7.69

Find annual requirement at future value

Rs 6 lakh needed annually at current value (C)

multiplied by 7.69 as inflation (E)

Equal to Rs 46.14 lakh

F : Rs 46.14 lakh

How long do you expect to live?

Retirement Age : 60 years

Life Expectancy : 90 years

Years Left : 30 years

G : 30 years

Calculate inflation post retirement

Annual inflation @ 6% + annual corpus growth @ 8%

H : 23.18

Corpus needed for retirement

Rs 46.14 lakh needed annually in future value factor (F)

multiplied by 23.18 as inflation (H)

= Rs 10.70 crore (I)

I : Rs 10.70 crore

Equity exposure and expected returns

Suppose you choose 50% Equity, the returns would be 10%

J : 10%

Monthly investment to generate Rs 1 crore

Amount to be put away (saved) per month for your retirement

Since the choice is 35 years (D) and returns rate is 10% (J), the monthly saving of Rs 2,634 per crore is required.

Chart based on your current Age:

k1 : Corpus Needed : Rs 10.70 crore

k2 : Saving per month : Rs 2634 * 10.7 = Rs 28183

Saving to be Done per month = Rs 28183

Saving that should be already done and invested for retirement

Current Age : 25 years:

Savings Already Done : 0 years

Savings expected to be present : k2 * k3 = 28183 * 0 = Rs 0

Current Age : 30 years:

Savings Already Done : 5 years = 60 months

Savings expected to be present : k2 * k3 = 28183 * 60 = Rs 17 lakh (Current corpus should be Rs 22 lakh including interest)

Current Age : 35 years:

Savings Already Done : 10 years = 120 months

Savings expected to be present : k2 * k3 = 28183 * 120 = Rs 34 lakh (Current corpus should be Rs 58 lakh including interest)

Reference:

Here's how to calculate how much you need to save for retirement