My Retirement Number

We do think about retirement. Some of us look forward to not going to work or take care of kids. Some of long for work. But have you thought about the money you would need in your retirement?

It is better to have an idea about the amount you would need. You might think you will not spend much when you are old and so you do not need much. Or you might have lots of retirement plans – continuing education or travelling the world and you are worried that you will never have the money for it. It is always better to think objectively about retirement. You will have less stress and also a starting point to take actions towards building the retirement corpus.

Here are some numbers that will help you get an idea on the amount you need for retirement. We will assume that you are 35 years old and will work till 55 and would have a retired life till 80 -

Current Monthly Expenses	Rs. 20000
Yearly Expenses	Rs. 2,40,000
Inflation Rate	6% p.a.
Total Amount needed from the age of 55 to 80 if we assume 100% of current expenses would be incurred during retirement.	Rs. 4,50,00,000
Total Amount needed from the age of 55 to 80 if we assume 80% of current expenses would be incurred during retirement.	Rs. 3,60,00,000

You would have to consider the following expenses -

Living Expenses – Basic expenses to maintain your current lifestyle.

Medical Costs – As you grow older, your medical expenses will rise.

Transport – You might reduce commute costs as you will not be working. But you might incur costs on visiting children and relatives in other cities or countries. You might use taxi services for places that you did not use when you were younger and fit.

Loans & Taxes – You might have paid off loans and so you will have no liabilities. Amount payable as income tax will reduce when you stop working.

Retirement Goals – If you have plans of owning a house in your home town or travelling or pursuing a hobby seriously, you will need funds.

What can you do to build your retirement corpus?

Just your salary or business income might not be enough to build the retirement corpus. Here are some steps to help you reach your retirement number -

1) Figure out the retirement number – Decide on the amount you would need for your retirement based on current expenditure.

2) Save & Invest – Save as much as possible and invest your savings. The value of savings gets eroded over a period of time. Investments lead to capital appreciation and income in the form of returns. You can invest in bonds, PPF, mutual funds, equity backed assets etc.

3) Plan short-term and long-term financial goals – Identify your financial short-term and long-term goals. The money for children's education or buying a house has to be separate from the retirement corpus. Retirement corpus is to be used when you retire.

Retirement is a certainty. It is important to plan and be ready for it than getting hit by it blindly. You should have  a financial plan for retirement and review in intermittently to make sure, you are getting the right returns and have the option invest more.