Retirement Planning Calculator

Planning for retirement is one of the most important aspect of personal financial planning. If one has plan for retirement during working years, s/he can reap the benefits of investment in the retiring period.
Planning for retirement involves many assumptions about living expectancy, state of economy, Interest rate and Inflation etc.

The retirement planning Calculator ask the user to enter following ten inputs –

1. Present Age (Today’s Age in Years) – The user needs to enter his/her current age in the tab.
2. Retirement Age (Age at when you will retire) – The user needs to enter the age at which s/he intends to retire.
3. Life Expectancy (Age till you are expected to live) – The user needs to enter the age till which s/he expects to live. This age can’t be less than age of retirement.
4. Long Term Inflation in economy (In % )– The user needs to enter the long term inflation expectation in the economy. Since RBI Constituted MPC has an inflation target of 4% to 6%. It is advisable to take inflation assumption between 4% to 7%. The sticky inflation (vegetable, education etc.) should not be taken for retirement planning purposes.
5. Present Living expenses per month (In Rs.) – The user needs to enter his/her present monthly expenses which s/he would like to maintain during retirement period, so as to maintain the present life style. For ex. A 30-year user having Rs. 50,000 monthly expenses would require Rs. 2,16,097 at the age of 60 due to inflation. Herein, the inflation is considered as 5% per annum.
6. Reduction in expenses after retirement (In % terms) – There would be certain expenses (Conveyance expenses, office expenses etc), which may not be required during retirement phase. The user may decide and enter % amount by which expenses may be reduced during retired life. If user thinks, there would be no such reduction, they may choose to enter “0” in the tab.
7. Expected Return on Investment during working years (In %) – This is one of the most important assumption which user needs to make while doing retirement planning. The user needs to enter the rate of return s/he is expected to make on the investments during their working life. In case of user is investing in Equity related products (Direct Stocks, Equity Mutual funds etc), the expected return may be more than the return earned on fixed income instruments. It is advisable to keep expected return expectation between 10% -15% for equity investments and 6% – 9% for fixed income investment. The user is advised to not assume unrealistic investment returns while planning for retirement.
8. Expected Rate of return during Retired Life (In %)– This is rate of return user is expected to receive on corpus he made during working years. It is expected that the user will invest the corpus made during working years in suitable financial products (Annuity, Fixed Income products, Govt Schemes) etc where in s/he can earn decent returns during their retired life. Since this investment would be during retired life, the user are advised to choose those financial products which carries minimal to no risk. Such products only yields return in the range of 5% to 7%. Therefore, Users are advised to not enter very high rate of return in this tab while entering their input
9. Current savings for the retirement phase (In Rs.) – If user has any existing savings which s/he would like to deploy for retirement phase, then s/he may enter that money amount in this tab, else user may enter 0 in this tab.
10. Amount of retirement benefits received at the time of retirement (In Rs.)– In this tab, the user is expected to enter the money s/he would be receiving in the form of retirement benefits from employer (EPF money, Gratuity etc). If user does not have such benefits, s/he may enter 0 in this tab.

The retirement planning calculator generates the following three output for the user: –

• Per month amount required during retiring life– It let the user knows how much money s/he would be require per month to maintain their lifestyle as assumed by them while making the retirement plan. For ex. A 30-year user having Rs. 50,000 monthly expenses during working years would require Rs. 2,16,097 at the age of 60 due to inflation. Herein, the inflation is considered as 5% per annum.
• Corpus Required at Retirement day to maintain present standard of living during Retired Life – It let the user knows how much money s/he has to have at the day of retirement to live comfortable retired life till they live.
• Investment Required per month to achieve Retirement corpus – It let the user knows how much money s/he has to invest per month to achieve retirement corpus as mentioned in point (b) above. In case, the user is getting an “0” answer in this tab, that means the user current saving and amount received as retirement benefits are enough to take care of user retirement needs. No separate investment is required.