How to Plan for Early Retirement Using a Retirement Calculator
Proper retirement planning is essential in order to live your golden years comfortably without any worries. The term can be defined as preparing one’s finances and investments for the period after retiring from work or when one stops working. This planning activity may begin from any stage after you begin earning, especially since inflation has to be factored into the mix. The key thing here is to invest in financial instruments that offer returns that surpass inflation easily. This will ultimately enable a high-quality and safe lifestyle at the time of retirement.
But how do you work out how much you need at retirement, especially if you wish to retire early? This is where a retirement calculator comes in immensely handy. Let us find out more about the same in this article.
Retirement Planning Calculator- What it Means
A retirement calculator is a useful online tool that will display the sum of money you will need once you retire. It helps you suitably plan investments in a way that you get a suitable corpus after retirement. This calculator will indicate the amount you will require to maintain your present lifestyle in the future. You will have to enter a few basic details online in order to get the results pertaining to the sum of money you require in the future. This may include your present age, life expectancy, annual/monthly household costs, and so on.
This calculator is immensely helpful, since you can quickly view the approximate amount that you will require in your golden years. It can help you plan your investments accordingly, without having to do back-breaking calculations through complex processes. It also helps you understand the varying yields/returns that you will get at different rates of interest. Hence, you can compare returns offered by diverse investment plans and make your choice accordingly.
How to Use Retirement Calculators- A Guide
Here’s how you can use a retirement calculator to conveniently work out the money that you will require after retirement. This is a free tool that will offer results in only a few minutes. You do not have to be a financial whiz or possess any technical knowledge in order to use the same. You should first calculate your annual or monthly costs, adding up everything like utilities, repaying loans, groceries, and more. Keep this amount aside and then note what you save. And then work out how much you will spend on these costs once you retire. Only account for things you will spend on, such as travel, lifestyle, healthcare, and so on. This will be the approximate amount necessary for covering costs after retirement.
Take inflation into account once you retire. When you have an average amount, multiply the same with the inflation rate in the future. For example, let us assume that the rate will be 10%. Now, if you spend Rs. 5 lakh yearly, then you will require Rs. 50,000 more in the next year over and above Rs. 5 lakh that you require every year.
The final step is to consider life expectancy, with the average figures in urban India standing at approximately 72.6. In case your annual costs at the age of 50 are Rs. 5 lakh annually, they will increase every year as well. Hence, take the inflation rate into account and then calculate for the entire period of 15-20 years after retirement.
The final step is checking out the retirement calculator and entering your present age and desired retirement age. You should input your yearly income and the percentage of the same that you wish to invest. There will be results generated instantly regarding the amount to be invested monthly and the corpus that it will ensure at different rates of interest.
Plan for Early Retirement from Today
If you can smartly plan for retirement from the time you start working, then it is possible to hang up your boots early without any financial worries. Do your research, use a suitable retirement calculator, and take professional advice en route towards building a solid financial future for yourself and your family.