A retirement calculator is a tool that helps in planning your retirement by calculating the corpus you need to build with regular monthly investment to ensure a hassle-free post retirement life. Retiring comfortably can be an easy task if you know how to save and invest smartly. You need to use a retirement calculator to determine how much return on investment you will be able to achieve.
Few goals could be as important as the goal of retirement. This goal does not only mean that you will be leaving the active profession but also expects you to have built a strong financial base for yourself.
Retirement marks the end of one era and the beginning of another. Your wealth must carry the weight of your financial needs in this new era. The chances of earning from employment would be minimal and you would not want to depend on anyone else for financial support.
Thus, careful planning is very important for a comfortable retired life, and you need an accurate retirement calculation for a good plan.
A retirement calculator helps you estimate the retirement fund you need to retire comfortably and the money you should start saving now.
What is Retirement Planning?
Retirement planning is a financial exercise to determine your needs for post-retirement pension, retirement corpus and current monthly savings for retirement. Retirement planning helps you save adequately for the golden years of your life without affecting your present or other future goals.
Retirement planning is also important for you as retirement investments are usually long-term. That means these investments can have a huge capital gain or interest income. Thus, you must take care of the taxation as well, to avoid paying a large amount of your earnings in taxes.
Another important factor which makes retirement planning important for everyone is the rising life expectancy. This means, that while your employment years remain the same, your retired years are now higher than before. So, you will now need to survive longer after saving for almost the same period as before.
With the help of regular retirement planning, you can build an adequate retirement corpus for yourself. This will include selecting the right investments for pre and post-retirement periods.
What is a Retirement Corpus?
A retirement corpus is an amount of money you will need at the moment you retire. This is the pool of money which will generate a pension for you in your retired life. Since there is usually no external income source, you need to rely upon your retirement corpus.
A retirement plan is well suited for long-term saving. The best retirement plans allow you to save tax on investment and the maturity value of the plan. Some of the retirement plans allow you to invest for a lifetime. Thus, you can continue to save money in the same plan and draw a pension from it without having to withdraw and reinvest.
Thus, investing in the right retirement plan as per your investment needs will make your financial life simpler and more satisfactory.
What is a Retirement Calculator?
A retirement calculator is a simple online tool that helps you calculate how much corpus you need to build to achieve post-retirement goals. This calculator works as a retirement planner for you. You can fill in your details such as current age, desired retirement age, current monthly expenses and current savings for retirement and estimate your retirement saving needs.
In simple terms, the tool helps you to perform the complex calculations of retirement planning in just a few clicks. The retirement planning calculator helps you plan the following two stages of your retirement goal:
1. Accumulation Stage:
You save and invest money in this stage to build a large corpus before you can retire.
Although the distribution stage comes after the accumulation stage in real life, the planning happens in reverse. Your actions in the accumulation stage are defined by the requirements of the distribution stage.
A retirement planning calculator helps you to build the scenario of both stages based on your present financial situation.
How does a Retirement Planning Calculator Work?
A retirement planning calculator takes all the disparate information and provides you with actionable numbers. You can enter information such as your current age, expected retirement age, current monthly expenses and retirement savings. The calculator will in turn provide you with a picture about:
i. The adequacy of your current retirement savings.
ii. The retirement corpus amount you will need to replace your expenses in post-retirement life.
iii. The amount you need to save each month to achieve the target retirement corpus.
For example, if you are 30 years of age, and want to retire at 55 you can estimate your total monthly saving needs. This calculation is based on your present monthly expenses which will continue in your retired life.
The calculator estimates the required corpus based on perpetuity. Since life expectancy is unpredictable, the retirement calculator assumes a perpetual need for a pension. Thus, if you aim for this corpus at retirement, you are unlikely to fall short.
How does a Retirement Calculator Help in Planning your Retirement?
A retirement calculator should help you determine the amount of money you need to start saving to achieve your retirement goal. For example, your current monthly expense is Rs. 50,000.
If you wish to maintain this lifestyle post-retirement as well, the retirement calculator will help you in determining:
The ideal retirement corpus
A monthly savings amount you need to invest to achieve this corpus
Thus, a retirement calculator can help you define your retirement goal and chalk out a plan to achieve it. The retirement calculator helps you define your retirement goal considering the age you wish to retire at and the present retirement assets you have.
You can also use the retirement calculator to assess if your present retirement investments are on the track to fulfilling your goal. If not, the calculator will give you an amount you can invest monthly to fill the gap.
Canara HSBC Life Insurance’s retirement calculator will help you with the following:
i. Saves time with complex financial calculations and deciding on retirement investments
ii. Estimate the monthly pension you will need at the time of retirement
iii. Estimate the retirement corpus you need to sustain your post-retirement pension needs
iv. Calculate the monthly savings amount for your retirement goal
vi. Save for your big post-retirement financial goals
Illustration: How to Calculate Retirement Corpus Using our Online Calculator?
Canara HSBC Life Insurance retirement calculator uses raw information relevant to retirement planning to estimate your financial needs related to retirement. The following example explains the step by step working:
Current Monthly Expenses
Current Saving for Retirement
Rate of Interest on Current Savings
Your monthly expenses post-retirement
Retirement corpus required
The amount you need to invest monthly
Rs 24.8 thousand
How to Use a Retirement Calculator?
Online retirement calculator is an easy-to-use tool that helps in estimating your retirement goals with the following five steps:
1. Current & Retirement Age:
Choose your current and desired retirement age. Slid the bars on the age scales to select the correct number. This helps in determining the investment period for building your retirement corpus. For example, if you are 30 and hope to retire by 60, you have 30 years to build your retirement corpus. While someone at the age of 45 has only 15 years for the same. This will affect your investment choices and corpus amount.
2. Current Monthly Expenses:
Mention your current monthly expenses. This expense should be the amount you expect to continue post-retirement. (see: Selecting Your Post-Retirement Expenses below). This is the amount which will be inflated until your retirement to estimate your monthly pension need. For example, if your present survival and lifestyle expense along with your spouse is Rs 40,000, 30 years later at your retirement this can grow to be more than Rs 1.5 lakhs at 5% p.a. inflation.
3. Current Savings for Retirement:
Mention the current value of your retirement investments and select a growth rate for the investment. This is the amount you have already parked for your retirement. This amount if not withdrawn will grow and add to your retirement corpus need. Thus, reducing your monthly savings need.
4. Press ‘Calculate’ and check the following values:
a) Monthly Expense Post Retirement:
This is the real value of your monthly living cost adjusted for inflation. The retirement calculator assumes an annual inflation rate of 5% p.a.
b) Retirement Corpus Required:
This is how much money you must have before you retire. This online retirement calculator assumes post-retirement inflation at 5% p.a. and investment growth rate at 6% p.a.
c) Amount you Need to Invest Monthly:
This is the money that you must save every month and invest towards your retirement goal.
5. Select a retirement plan to start your retirement investment or leave your contact information to receive a call from an expert advisor.
The online retirement calculator from Canara HSBC Life Insurance helps you in your retirement planning and chalk out the investment gaps for you. Use the calculator to save adequately for your post-retirement income needs.
Benefits of Retirement Calculator
Saving for your post-retirement life may be one of the important financial goals in your life. Accumulating the desired corpus will help you in leading a comfortable life after you decide to retire. And knowing how much you need to save will help you plan during your pre-retirement phase or working years:
1. Simplify your Retirement Plan
A retirement goal is one of the most complicated and long-term financial goals for you. The retirement calculator breaks down your retirement planning stages into easy-to-understand steps. You can understand each step easily and be more confident with your investment decisions.
2. Arrive at Actionable Steps Quickly
Investment results are achieved only with investment actions. The faster you can act the better the results. A retirement calculator helps you envision the retirement plan quickly and start acting. You can revisit the calculator to see the changes in the conditions of your goal and adjust your investments accordingly.
3. Compare Different Scenarios Like Retiring at Different Ages
A retirement calculator is an easy tool to run different retirement scenarios. For instance, if you want to retire early, you can check the possibility with your current investment capacity. Similarly, if you are low on retirement savings the calculator helps you adjust your savings or retirement age.
4. Assess your Current Retirement Investments
Low retirement funds early in the career can be replenished easily. However, this will be difficult as you get closer to your retirement goal. Thus, you should use the calculator frequently to keep a check on your existing retirement corpus.
5. Find Out the Probable Size of your Retirement Corpus
The size of your retirement corpus defines the quality of your lifestyle post-retirement. If you can save more, you can build a bigger corpus, or perhaps even retire early. The online retirement calculator will quickly determine the adequacy.
If your present saving need for the goal comes to be zero, you are all set to have a larger retirement corpus with minimal additional investment.
How Much to Save for Retirement?
The amount of money you should save for your retirement depends on the following factors:
a) Your expected post-retirement expenses b) Desired retirement age (or time to retirement) c) Life-expectancy
Your expected living cost after you retire could be a fraction of your present household cost. In general parlance, mathematically your monthly income at the age of 30, should be enough to take care of your expenses at the age of 60.
However, both your income and expenses will rise with time, due to inflation. Your lifestyle expense may as well exceed your expectations or may even remain lower than that. However, in any case, the number will only depend on your income growth.
Therefore, it is wise to invest a portion of your income towards retirement, so that the corpus can replace your income after some time.
Given the interest rate and inflation conditions of India, starting at the age of 30 you can save 10-15% of your monthly income towards a comfortable retirement at 60.
However, if you wish to retire earlier, you may need to increase your investment, for example up to 20% if you want to retire at 55, and up to 35% if you want to retire at 50.
Retirement is that period of life when you no longer need to work for looking after your expenses. For large organizations and government services, retirement will mean, relieving from services due to age or superannuation. After retirement, you can expect to receive a pension for looking after your regular needs.
Retirement is a long-term and complex financial goal. Retirement planning helps you simplify the goal and start investing. It will also help you course-correct during your employed years to build an adequate retirement corpus. Adequate retirement corpus is necessary if you want to have a consistent lifestyle after retirement.
A retirement planning calculator is a free online tool to help you plan your retirement goal. Best retirement planning calculators help you understand your retirement financial needs and create an investment plan to meet the desired goal.
Pension is the regular sum you receive from your retirement savings plans after you retire. The investment plans which provide pensions are also called annuity plans. These plans allow you to invest a large sum of money for a long period and draw a regular sum as a pension. Pension replaces your income from employment after your retirement.
Your pension will depend on the retirement corpus you have built up to the point of retirement. Retirement age, life expectancy and pension plan benefits also play a role but are not as significant. You can use retirement calculators to estimate your pension need while you are trying to build the corpus.
You can use the online retirement calculator by Canara HSBC Life Insurance. The calculator only need details of your current expenses, your age, and the age you wish to retire at. Once you fill in this information, you can estimate the amount you will need to retire comfortably.
Use online retirement calculators to estimate the adequate retirement corpus for your needs. These calculators are free to use and help you determine the corpus need based on your present monthly expenses and age.
The best retirement plans in India include National Pension Scheme (NPS), Public Provident Fund (PPF), ULIP, and endowment plans are some of the best available retirement plans in India. Canara HSBC Life Insurance offers ULIP plans like Invest 4G, Smart Lifelong Plan and endowment plans like Secure Bhavishya Plan for retirement investment.
Retirement plans like Invest 4G, PPF, and NPS allow you to start investing any time before the age of 65. You can continue investing in these plans up to the age of 99. Thus, if you start investing in these plans by 30, you can build a strong corpus and draw a pension without reinvesting the corpus in a different plan.
Any amount which enables you to receive sufficient inflation-adjusted income, after you have retired until your demise is a good amount to retire with. For example, if you are 30 and expect your post-retirement expenses to be Rs. 25,000 in today’s terms when you are 60, you will need about Rs. 1 lakh p.m. in real terms.
To generate such inflation-adjusted income for about 30 years after your formal retirement, you will need a corpus of about Rs. 2.3 crores.
The amount you will need to retire is unique to your lifestyle, age, and financial needs. You can use the Canara HSBC Life Insurance simple online retirement calculator to assess your retirement needs. The online calculator helps you estimate your retirement funds based on your present monthly expenses, age and expected retirement age.
The earlier you wish to retire the higher the retirement corpus you will need. This is because your post-retirement period extends by a few years. Thus, your corpus has to provide for a longer period than earlier. Also, your monthly savings must be much higher to achieve this corpus as you have less time for growing the invested money.
It depends on your current age, saving capacity and investment options. If you are 30 years of age, you will need to start saving anywhere between Rs 20,000 and Rs 25,000 per month to achieve your goal. Also, your annual savings must increase as your income does. Generally, a 5% p.a. growth in your investment amount will comfortably take you to the desired goal.
Ideally, you should aim to recreate your income which is a little more than enough to take care of your regular financial needs post-retirement. In India, the amount could vary depending on your financial condition, place of residence and lifestyle. In todays’ terms for an urban setting Rs. 50,000 to 1 lakh should be good enough to have a post-retirement income. However, for semi-urban and rural settings even a lower amount would work.
If you want to receive Rs 6000 a month as a pension when you retire, this is probably not enough money for a comfortable retirement if you have just started earning. However, if you are 25 and want to start saving Rs 6000 a month towards your retirement, this could be a good amount to start with. But imagine getting Rs.6000 every month to live your life after 20-25 years, when the cost of goods would have increased due to inflation. The amount may not be sufficient to take care of your post-retirement expenses.
How long will a corpus last depend on two factors – the amount of regular withdrawal and the rate of return on the invested money. If your withdrawal is lower than the rate of interest earned on the invested money, your corpus can last forever. For example, if you can invest Rs 1 crore at 6% p.a. after tax, you can withdraw up to Rs. 6 lakhs without depleting your initial corpus. However, if you withdraw Rs 7 lakhs p.a. your corpus will last about 28 years.
Retirement is a long-term financial goal. Thus, in the early years, you can afford to take more risk on your investments and aim for better growth. However, after retirement even as an aggressive investor, you should avoid taking more risk than a AAA-rated corporate bond on your retirement kitty.
Thus, in the post-retirement period, your average rate of return would range between 6% to 8% p.a. depending on the market scenario.
When a person retires, they receive certain benefits from their employer. That retirement benefit is taxable. However, some of them are exempted from taxation. When you buy a retirement plan, you are eligible for tax deductions of up to Rs. 1.5 Lakhs under Section 80C of the Income Tax Act.
Inflation does not directly affect retirement savings. But high inflation means you will need more money to look after your expenses after you retire. Thus, you will also need a bigger retirement corpus. This ultimately boils down to your present retirement saving needs. For a larger corpus, you will need to save more.
Terms & Conditions
This calculation is generated on the basis of the information provided and is for assistance only. And is not intended to be and must not alone be taken as the basis for an investment decision. The calculations mentioned above take into consideration an assumed rate of inflation of 5% and rate of return of 6% on post retirement corpus.