Retirement Planner Calculator

Fundamentally speaking, the objective of retirement planning is to prepare yourself financially for the years after retirement. It is important that you start planning for your retirement as soon as possible. Factors like inflation are always eroding the value of your money. This is exactly why you must invest in financial instruments to build a corpus that could help you on days when you are not working. This is where the retirement planning calculator comes and saves you. It is a very useful tool that shows you the amount of money you will need after you retire and thus you can plan and take informed steps in that direction.

Here's the formula to calculate the Retirement Calculator:

Where

FV is Future Value

PV is Present Value

n time to retirement

r expected inflation

For example : . Let’s just say that you are 35 years of age and you will be retiring at 60. And after retirement, you will require a monthly corpus of INR 35,000. So, what would be the retirement corpus you would need on investing the retirement savings in a bank FD that would offer you an 8% yield? We will be taking the inflation rate as 6%.

FV = 35,000 (1+0.06)^25    = > Rs 1,50,215.5
FV = Rs 150215.5 * 12    = > Rs 18,02,586.

The annual income you would require after retirement will be Rs 18,02,586.

Income required is = Rs 18,02,586
Retirement Timeframe = 20 years. (Assuming Life Expectancy of 80 years – Age of Retirement of 60 years).
Rate of return on corpus = 8%
Inflation Rate = 6%

Inflation adjusted rate of return = (1+0.08)/(1+0.06) – 1
= 1.89%/12 = 0.001575.
Retirement Period = 240 months. (20 years *12)
PMT = Inflation adjusted monthly income at the time of retirement = 18,02,586/12 = Rs 1,50,215.

• Use an Excel Calculator for calculating the retirement corpus. Select Nper = 240 months and Pmt = 150215. Type = 1.
• The Corpus required for Annual Income of Rs 18,02,586 comes at Rs 3,00,48,832.
• You should be investing Rs 3,00,48,832 in the 60th year at a rate of return of 8% so that you can get an annual income of Rs 18,02,586 for a period of 20 years.
• And by using the PMT function in excel you will get to know that an amount of INR 31,262 would be required as monthly savings for accumulating your retirement corpus.

How to use Retirement Calculator?

• Enter your current age in years by using the slider
• Enter the retirement age by when you would want to retire
• Fill in the monthly income which you would require after retiring adjusted according to the expected inflation rate
• You will get to see the annual income that you would require immediately after retirement along with additional retirement funds that must be accumulated, and also the savings on a monthly basis which will be required in the first place to accumulate the fund.

Benefits of using the Retirement Planning Calculator

• First and foremost, it helps you plan your finances after your retirement.
• You will have a clear picture of how much you need to save month on month for the purpose of meeting your retirement goals.
• It will also give you a basic idea of the future value of your current expenses.