It is vital to start retirement planning early. It will allow you to build a sufficient corpus at retirement, simultaneously enjoy life, and take care of all your responsibilities. Some people save money ‘randomly’ without much planning. It is like studying without knowing what might be asked in exams. On the other hand, retirement planning will help you reach goals effortlessly. That is why you must plan backwards, like an exam, and develop financial resources accordingly, which will grow and last a lifetime.
But how do you know if the corpus is enough for your golden years? A simple answer is to calculate the amount needed at retirement, depending on the family situation, health condition, income source, relocation, etc.
So, here’s how to calculate your retirement corpus.
Calculate The Number:
There are different calculators available for free on the internet with which one can find out the amount needed by the time one retires. So, work out your expenses and current and future income and use the calculator to determine how much you will need after retirement.
Risk Coverage:
Life and health insurance are vital to secure oneself against unforeseen exigencies, especially when one has dependents. According to experts, one should have around Rs 10-20 lakh of health coverage to a minimum and life coverage of at least 10 times annual income to safeguard against mishaps.
Regular Cash Flow:
Ensure a regular cash flow that can last a lifetime. The free online calculators can provide you with a ballpark number for retirement. However, for more help, you can seek help from registered advisors or financial planners. They can assist in understanding the gaps in retirement planning and whether any change is required in investment patterns to achieve your goal.
Retirement planning has investment rules like the 50:30:20 rule, the 100 minus your age rule, the 4 per cent withdrawal formula, etc., but don’t forget every individual is unique, and so are their savings, investment patterns, and situations. So, following these formulas blindly may not help; instead, they should use them as guiding principles to make a unique plan for oneself.
Once you have covered the risks, you will need to build a regular cash flow source, considering inflation, liability, and emergencies, before you are financially secure.
