3 Steps To Retire The Right Way: How Much Money Do You Need For Your Retirement?
Updated: May 25
"It is never too early to start planning for your retirement"
We have always heard that we must plan for the worst and hope for the best. As cliche as you may think it is, it holds good at all times and for eons to come.
We say that it's better to plan for more than you need to live a comfortable life. As preachy as it may sound, it might just save you from loads of stress after retirement.
In this post, we walk you through how to retire the right way and keep stress at bay. Brace yourself for an insightful read on retirement planning. We will discuss the following steps:
7 out of 10 people are underprepared for their retirement. Check it out for yourself.
There is also a segment of people whose "retirement plan" is pretty straightforward and simple.
What is it?
Their Children! That's precisely why so many Indians are underprepared for their retirement.
Most people assume that their savings, EPF, PPF, annuities, or gratuity, etc. will have them covered for the rest of their post-retirement life.
However, in reality, there is a myriad of other factors that comes into play.
Inflation, market volatility (how interest rates of the current investments may fluctuate), and future expenses to maintain current lifestyle post-retirement are only a few of such factors that are often inadvertently brushed under the carpet while planning for retirement.
Here are 3 steps to calculating the most realistic estimate of how much money you need to lead a comfortable life after your retirement.
The steps may be seemingly obvious but we guarantee that the insights are eye-opening.
Step 1: Have a Vision for your Retirement
The starting point of retirement planning is to develop a clear vision for the lifestyle you want to live post-retirement.
This is where we start as it decides the corpus you require for retirement.
To maintain your current lifestyle or to amp it up a bit, it is imperative that you have a sufficient corpus by the end of retirement.
Your lifestyle aspirations may change with time under certain circumstances, such as increased income, switch in career or job role, so on and so forth.
The changes in your vision can be accommodated for as and when the change occurs.
There are several components to lifestyle.
The most crucial of all being the city, community, or environment in which you want to live after retirement, your consumption rate (of products, commodities, etc), the experiences you want to have, and your level of effort to stay healthy & fit.
With increased awareness of healthcare and the advancements in Medtech, life expectancy is increasing by the day.
Hence, it becomes important to plan for more than you think you might need currently.
Pro Tip: A little more than what's required never harms but pays off.
Step 2: Calculate Corpus Required Realistically
Have you actually calculated the exact amount you would require to lead a comfortable life after retirement? It's too complex to do it all by yourself.
This is a comprehensive retirement calculator that gives an accurate and realistic picture of how much you really need for your retirement.
Did you know that even a 1% increase in the inflation rate could increase your retirement expenses by almost 43% for 20 years?
We aren't kidding again. These stats are for real.
Apart from the effects of inflation, there are other factors crucial factors that decide the actual corpus you require.
Post-retirement lifestyle aspirations
Volatility in market conditions
Risk accommodation for current investments
Step 3: Plan Your Investments
To reach the required corpus easily, you must plan for your retirement.
If you wish to do so effortlessly, you might want to check this out.
We are often asked a question: "When is the right time to start planning for my retirement?"
The answer however is plain and simple: RIGHT NOW!
If that's a bit dramatic for you, maybe we could say "the sooner, the better". Starting early always reaps its fruits.
No matter your age, 21, 30, 40, or 50, it is never too late to start preparing for your retirement.
You may ask: Why invest my time, effort, and money in just planning for my retirement goal? Why can't I directly invest in products that can grow my wealth?
Well, if you fail to plan then you must plan to fail (yet another cliche, but it never seizes to be true).
"An idiot with a plan can beat a genius without a plan" - Warren Buffet
The most popular investment options for a steady stream of income post-retirement in India are:
1. Pension Investments
2. Senior Citizen's Saving Scheme (SCSS)
4. National Pension Scheme
& so on
Stats suggest that if you delay your planning and investments for your retirement by 3 years, you will lose out on 30% of the corpus you could have earned at a 12% interest rate.
You can begin your hunt for the best investment options to grow your wealth for your retirement here.
Retiring the right way isn't rocket science. There are multiple benefits of Retirement Planning. Start by designing a vision for your lifestyle. This will help you get a realistic estimate of the corpus you may require. Finally, generate a plan for your retirement and take action.
All it takes to live the retirement life of your dreams is to start your plan, execute it, and stay on track with it. As simple as that.
At MoneyPlanned, our mission is to empower and help our users live a financially fulfilled life.