Retirement Calculator

Retirement planning is about getting your finances ready for when you stop working. Ideally, you should start as soon as you get your first paycheck. Because inflation can reduce the value of your money, it’s important to invest in things that can grow faster than inflation over time. This way, you’ll have enough money to enjoy a good lifestyle when you retire.

To plan effectively, you need to estimate your future expenses, decide when you want to retire, understand how much risk you can handle, and choose investments that are tax-efficient.

Since people are living longer, it’s important to save and invest for retirement so you don’t have to rely on family for money. When you get a salary increase, try to save more for retirement. Avoid using the money you’ve set aside for retirement, as it benefits from compounding interest over time.

A retirement planning calculator helps you figure out how much money you'll need to retire comfortably. You enter details like your current age, the age you plan to retire, how long you expect to live. You also need to estimate the inflation rate usually around 6-7% per year and the expected return on your investments, and indicate any money you’ve already saved for retirement. Retirement planner calculator then tells you how much annual income you’ll need, how much extra you need to save for retirement, and how much you should save each month to build up the amount you need by the time you retire.

A retirement planner can help you estimate the amount you need in retirement. Also, it will calculate your corpus, which will generate retirement income.

Here is an example of how the retirement planning calculator works.

Assume that you will need Rs 35,000 per month in retirement. Your current age is 40, and you plan to retire at 65. How much retirement corpus would you need to invest in a bank FD that offers an 8% return? (Assume 6% inflation)

Using the formula: FV = PV (1+r)^n

Where

FV = Future Value.
r= expected inflation at 6%
PV= Present Value
n= time to retirement (65 years – 40 years) = 25 years.

FV = 35,000 (1+0.06)^25 = Rs 1,50,215.5

By multiplying the monthly amount by 12, you get a yearly figure this gives you Rs 150215.5 * 12 = Rs 18,02,586.

As soon as you retire, you will need an annual income of Rs 18,02,586.

Let’s calculate the retirement corpus to provide an annual income of Rs 18,02,586 at the beginning of the retirement period.

● Retirement income requirement = Rs 18,02,586
● Retirement period is = 20 years (Life Expectancy of 80 years - Retirement Age of 60 years).
● Return on corpus = 8%
● The inflation rate is 6%

Inflation adjusted return = (1+0.08)/(1+0.06) – 1
= 1.89%/12 = 0.001575.

The retirement period in months is 240 months. (20 years *12)

PMT = monthly income at retirement adjusted for inflation = 18,02,586/12 = Rs 1,50,215.

The PV function in Excel can be used to calculate the retirement corpus. Choose Nper = 240 months and Pmt = 150215. Type = 1.

A corpus of Rs 3,00,48,832 is required to generate Rs 18,02,586 in annual income.

Hence, to receive an annual income of Rs 18,02,586 for 20 years, you must invest Rs 3,00,48,832 in the 60th year at an 8% rate of return.

Using the PMT function in Excel, calculate the monthly contributions towards the Rs 3,00,48,832 retirement corpus. As a result, you need Rs 31,262 to accumulate the required retirement fund.
 

The formula to calculate the future value (FV) of your retirement savings is:

FV = PV (1+r)n

Where:
•    FV represents the Future Value of your savings.
•    PV is the Present Value or the amount you currently have saved.
•    r is the expected inflation rate, assumed to be 6%.
•    n is the number of years until retirement, which in this case is 25 years (calculated as 60 years minus your current age of 35 years).
 

The 5paisa Retirement Planning Calculator is a useful tool that quickly estimates the annual income you'll need at retirement to maintain your current lifestyle.

•    To use retirement planner calculator, start by entering your current age in years.
•    Next, input your desired retirement age and your expected life expectancy.
•    Enter the anticipated inflation rate and expected return on investment.
•    The 5paisa Retirement Planning Calculator will provide you with the annual income needed right after retirement, the additional retirement funds required, and the monthly savings necessary to reach that goal.
 

A retirement fund calculator in India is useful because:

Monthly Savings Goal: Retirement planner calculates how much you need to save each month to build a large retirement fund.

Investment Guidance: The retirement planner calculator helps you find the right investment opportunities to grow your savings.

Compare Retirement Plans: You can compare various retirement plans offered by financial institutions and even listed companies.

Review Planning Strategies: The retirement planner helps you identify and compare different retirement planning strategies to choose the best one.

Plan for Big Expenses: If you have high-value goals for retirement, the calculator shows you how much to save to achieve them.

Time-Saving Tool: When you're short on time, the calculator helps you quickly make important decisions about your future investments.
 

•    Helps you plan your finances for life after retirement.
•    Shows how much you need to save each month to reach your retirement goals.
•    The 5paisa Retirement fund Calculator quickly shows you the amount you’ll need by the time you retire.
•    Gives an estimate of what your current expenses might look like in the future.
•    Helps you plan for extra expenses in retirement and suggests increasing your savings now if your retirement fund isn’t enough.

Planning for retirement is crucial, and the earlier you start, the better. Here’s how you can approach retirement planning at different stages of your life, especially if you plan to retire at 60:

1. Retirement Planning in Your 20s

Starting your retirement planning in your 20s is a smart move. Since you have a long time before retirement, you can save smaller amounts but still build up a significant fund because to the power of compounding. 

At this age, you probably don’t have major financial responsibilities, so it’s easier to save a larger portion of your income around 30% to 40%. By investing in options like mutual funds or stocks, you can grow your money more effectively. Using an online retirement fund calculator can help you figure out how much you need to save to reach your goals.

2. Retirement Planning in Your 30s

If you start planning for retirement in your 30s, it’s still okay you have about 30 years left. Your income is likely higher than in your 20s, but you may also have more financial responsibilities, such as family expenses.

At this stage, aim to save at least 15% to 20% of your income for retirement. Creating a budget can help you cut down on unnecessary expenses, allowing you to save more. It's also important to invest in both risk-free and higher-risk options like fixed deposits, mutual funds, and stocks. A retirement calculator can guide you on how much you need to save each month.

3. Retirement Planning in Your 40s

In your 40s, you still have 20 years to build your retirement fund. Your income might be higher, but so are your responsibilities and expenses.

Because you have less time, you need to save a larger portion of your income—around 15% or more. Start by paying off any debts quickly so you can focus on saving for retirement. A mix of safe and riskier investments is advisable to help your money grow. A retirement calculator can help you plan this effectively.

4. Retirement Planning in Your 50s

If you’re in your 50s and haven’t started planning for retirement, it’s urgent to do so now. You have only about 10 years left, so every decision counts.

At this age, your focus should be on saving as much as possible and avoiding unnecessary expenses. Clear any outstanding debts quickly. It’s generally safer to invest in low-risk options, but if you’re knowledgeable, you can still consider some market-linked investments. A retirement calculator will be essential in helping you understand how much you need to save and where to invest.