Monthly rent if you are staying in a rented house.
If you are staying in your own house, mark it as zero.
EMIs are also to be excluded.
8AM - 8PM
years old. I plan to retire at
My life expectancy is
Existing Investments for Retirement
*Assuming inflation rate: 6%
*Assuming SIP returns p.a: 13.3%
*Existing Investments for Retirement: 8%
CORPUS REQUIRED: ₹ 15,61,37,595
MONTHLY SIP REQUIRED: ₹ 31,900
Retirement Planning doesn’t solely mean that you need to plan your finances. It requires a combination of Personal and Financial Planning. Personal planning determines your satisfaction during your retired life. While financial planning helps in budgeting your income and expenses based on your personal plan.
Personal Planning can be done answering a very basic yet a powerful question yourself. How would you want to spend time during your retirement?
Would you want to travel the world? Or pursue your hobby which you didn’t have time for? Sign up for a course that you would want to learn? Or volunteer at an NGO? Or start an entrepreneurial venture?
Try and understand your lifestyle needs and preferences which will help you estimate your financial needs to achieve the goals.
Financial Planning will help you estimate whether you have adequate retirement funds to achieve the kind of retirement that you are envisioning. Mostly, income during retirement would be either through government pensions or employment-related sources or your personal investments.
Upon understanding the various options, you need to start investing regularly. For this, Start investing a fixed portion of your salary: Save at least 20% of your salary and gradually keep increasing the amount. The more you save, the more you would be financially independent in your retirement years.
Invest your salary hikes, bonus, and refunds: You are doing just fine without any extra money. So, any excess money that comes your way should be invested. Do not spend this excess money on things that you don’t need.
Prioritize: You need to prioritize your goals based on their importance and time. For instance, if you are to decide between your child’s educations or your retirement account, most of us would be willing to sacrifice our earnings for our kids’ future. But, it’s okay to be selfish sometimes. In other words, you can always take an education loan for the education, while no loan would be given to you for your expenses during your retirement. Your child has their entire lifetime to repay the loan.
Delay your retirement: The average retirement age is 62 years. However, this varies from person to person. Age is just a number! Try to keep your self-engaged until your mental and physical strength supports you. If you are an entrepreneur, work till you know that the time is right for retirement. If you are a salaried employee, look for alternative options that would help you earn money. Be it conducting tuitions or training other young professionals, opening a restaurant, etc.
Limit your retirement spending: It is advised to limit your spending during your retirement years. It is quite difficult, but be strict with your expenses. Avoid those unnecessary urges to buy something which isn’t that necessary.
Use Retirement Planning Calculator to find how much to save per month for retirement. Retirement age calculator and retirement date calculator are also a part of Upwardly Retirement Calculator. Upwardly Retirement Planning Calculator is simple to use and comprehensive in its approach. Find out how to calculate your retirement savings or retirement fund.
Use Upwardly retirement calculator to find how much retirement corpus you require to maintain a comfortable retired life in India.
How old are you? And When do you want to retire? This will help in planning your investments. In other words, for a person starting their retirement fund at the age of 30 years, would be suggested a more aggressive portfolio when compared to a person starting at the age of 45 years.
Next, identify your expenses. For example, house rent, bills, salaries to household help, fuel, maintenance, medicines etc.
Monthly Rent - Monthly rent if you are staying in a rented house. If you are staying in your own house, mark it as zero. EMIs are also to be excluded.
Household Expenses - This would include salaries to household help, groceries, personal care, commute, water, and electricity etc.
Shopping & Dining - Include monthly average amount spent on garments, dining out, electrical appliances, electronics, furniture etc.
Health Care - Expenses on hospital visits, medicines, medical tests, gym subscription etc.
Vacation - Expenses on travel to other cities, visits to hometown, relatives & friends, tourism etc.
Your personal details like marital status, dependents, your smoking habits and place of stay during retirement also matter while deciding your portfolio. Depending on the number of dependents i.e. children and parents, the retirement fund requirement will be scaled down. And your smoking habits would scale up your medical expenses.
Disclosing your current investments would help in estimating the retirement corpus in a better way. For example, monthly PF contributions, Mutual Fund, Shares, Gold, Land, etc. Upon considering these investments, the portfolio would suggest how much more would you require in order to save for your retirement fund.
Below graph shows the projection of your expenses on retirement. An estimation of corpus required and Monthly SIP amount has been given upon evaluating your profile.
Now that we know the corpus required, let's see how you can achieve this. From the three portfolio suggestions given below, you can choose the best plan that suits your investment style and risk appetite.
Upon choosing a plan, in this case, a Balanced Plan, below are the funds recommended for your investment and you can invest in the portfolio with just a click.
Let’s see how much Mr. Aansh Malhotra would need at retirement. He is 30 years old married man who is planning to retire at the age of 60 and expects to live till 85 years. The rate of return for his investments is considered to be 12% p.a. The inflation rate considered is 6%. His monthly expenses are Rs 50,000. He spends Rs 1,00,000 annually on health and vacation. It is assumed that the expenses after retirement will reduce to 75% of his current expenses and that he currently has no investments for retirement.
|No. of years to retirement (T)||30|
|No. of years after retirement (N)||25|
|Expected rate of return [R]||12%|
|Inflation rate (i)||6%|
|Return after inflation adjustment (r)||5.66%|
|Currently monthly expenses||Rs 50,000|
|Health and vacation||Rs 1,00,000|
|Current expense per annum||Rs 7,00,000|
|Inflation adjusted expense per annum at retirement||Rs 40,20,443.82|
|75% expenses||Rs 30,15,332.87|
|Corpus needed on retirement||Rs 4,54,07,579.33|
|One time investment||Rs 15,15,610.73|
|Yearly investment||Rs 1,67,994.16|
|Monthly investment||Rs 14,738.06|
Mr. Aansh Malhotra would need Rs 4.54 Cr at the time of his retirement. He can invest Rs 15.15 lakhs as a one-time investment or invest Rs 1.67 lakhs yearly for the next 29 years or invest Rs 14.7K monthly for the next 29 years 11 months to get the desired amount at the time of retirement.Mr. Aansh Maholtra is planning for retirement at an early age, hence the monthly investment is on the lower end.
Is it possible to retire with a corpus of Rs 5 crore at the time of retirement? Well, it depends on your age, expenses, lifestyle after retirement and how much are you willing to contribute to retirement at that age. Ideally one should start planning for retirement right from the time they started working. This makes it easier to invest small amounts and arrive at a huge corpus. Considering the retirement age of 60, the monthly investment at different ages has been calculated. It is assumed that the annual return will be 12%
|Age||Investment Horizon (in years)||Monthly investment @ 12% return p.a.|
The above table shows that smaller amounts are invested regularly at young ages as the investment horizon is longer. As the person’s age is increasing so is the monthly investment to reach the goal amount. This is because the investment horizon is reducing and return is earned for the lesser number of years. This means investing from younger ages will reduce the financial burden on you. Investing in small amounts for a long period of time aids in earning high returns due to compounding.
Saving or investing for the purpose of retirement should start right from the time one starts working. But one need not worry if they haven’t started that early in life. Different age groups see life differently. People in their 20s are more inclined to spending or saving for short-term goals rather than long-term ones. In 30s people tend to be busy with loan repayments and kids. It’s in their 40s that people start investing/saving for the purpose of their retirement. Even though they have 15 odd years in their hand until retirement, most of their savings have to be channelized towards their retirement. But it’s never too late to start investing for retirement. I agree that starting early has its own benefits but better late than never right! Here’s a guide for people of different age groups that they can refer for saving and investing.
If starting in the 20s investing or saving 5% of one’s salary towards retirement is enough. They can gradually increase it to 10% in their 30’s. This is because the investment horizon is around 30 plus years and compounding will do its magic in the long-term. The success of compounding lies not with starting early but sticking to it till the age of 60. It doesn’t matter if one starts investing at the age of 20 if he discontinues the investment early. In the 20s one has to look at investing more in equity than in any other asset class. Close to 90% of the investments can be in equity.
If starting in the 30s investing or saving 10% of one’s salary towards retirement is enough and slowly this can be increased to 40-50%. This is the age where the financial responsibilities will be at its peak with loan repayments, EMIs, and kids. So investing 10% is sufficient for now. Later the investments can be increased. Equities still should be a major part of the investment (close to 80%). Debt, gold and any other asset can take up the leftover part.
It’s not too late to start in the 40s. Saving 15% of one’s salary towards retirement is sufficient and this can be increased gradually later. Investing close to 70% in equities is suggested for people in their 40s. Debt can be close to 20-25% of the portfolio.
If you are starting in your 50s then 20% of your salary should be invested towards retirement. You will still have 10 years until retirement and this saving will be enough for reasonable living standards. Try increasing the investments at a faster pace as during this age you will have less financial responsibilities. The kids will be done with college and they will start working too so you will have fewer expenses. Hence you can start saving more. Investing close to 60-65% of assets in equity is suggested. Investment in debt securities will start increasing in your assets at a faster pace.
A handful of them will be having regular income from employment. It’s the time to relax and enjoy a life’s worth hard work and use the money you saved up. Liquidating all the investments at once is not suggested. Opting for monthly income plans or redeeming investments calculatedly so that you can meet your monthly expenses is something one should concentrate on. Investments can still be done with 30% assets in equity and 70% assets in debt.
There are 6 investment products that are meant to generate your retirement fund or retirement corpus. These products have their own unique features, taxation, and maturity and lock-in periods.
Mutual Funds are investment schemes professionally managed by financial experts. These investment schemes could invest in Shares/Stocks (Equity), Government and Corporate Bonds/Securities/Debentures (Fixed Income) or a mixture of the Equity and Fixed Income Securities. Mutual Funds are bought and sold in Units. Mutual Fund units are allocated to investors based on the proportion of their investments and value of these units is tracked as Net Asset Value (NAV) which is daily released by the Fund houses. Read here to understand the taxation structure of Mutual Fund.
National Pension Scheme or NPS is a voluntary, retirement savings scheme run by the Government of India. The funds invested in these schemes by different investors are pooled together and invested in a diversified portfolio. This portfolio is managed by approved fund managers under pre-defined investment guidelines. The portfolio comprises of stocks, government bonds, treasury bills, corporate debentures, etc.
PPF is a small savings scheme offered by banks. Investments made in PPF have a lock-in of 15 years and give a fixed return according to the interest rate published by the Ministry of Finance every quarter. The interest rate on PPF stands at 8% p.a. Investment in PPF is tax-exempt subject to ₹5 lakh total exemptions across various 80(C) schemes. The interest earned on PPF is also tax-exempt.
EPF is maintained and overseen by the Employees Provident Fund Organization of India (EPFO). This is a retirement benefit scheme for salaried employees. Around 12% of your basic salary is invested in this account. This monthly saving can be used in when you are unable to earn or upon retirement.
Term insurance has almost become a necessity followed by medical insurance. But pension plans with insurance and investment option is not something that I would suggest. Instead, opt for term insurance and then invest the rest in equity markets either through mutual funds or shares to gain high returns. Pension plans and ULIPs that combine investments and insurance are no good. The two are best kept separate. These not only generate poor returns of 4–5% but also have long lock-in periods.
APY is a deferred pension plan. To be eligible under this plan, one needs to be between 18 - 40 years of age with a savings bank account. Under this, there are 5 plans with guaranteed pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000. Returns are fixed at 8% and are assured. But unfortunately, there is an investment (and pension) cap for this. Do not depend solely on this source for your retirement income.
Retirement should be the best time of your life, where you are relaxing with your spouse by sipping cocktails by the beach or a coffee by the countryside or traveling the world. To have a worry-free retirement you should be able to reap the benefits from what you have earned during your employment.
When we are young, we have the tendency to postpone our retirement planning. This is usually because retirement is too far to worry about in your 20s or early 30s. Well, for your dreams to be realized you need to have a proper plan for your retirement income.
Every person sees life in a different way. Few want to retire as soon as they turn 40 or 50, while few at the exact retirement age and few would never want to retire. There is no ideal retirement age for everyone. It differs from person to person. There are a number of factors that affect this decision for each person.
Knowing what you’ll do after retirement plays a major role. If you want to travel, or just relax in the countryside or take up a new hobby or work anywhere, any of these can affect the retirement age. By knowing what you’ll be doing right after retirement is important as it gets easier to calculate the expenses and incomes post-retirement. Relaxing in your own house in the countryside will be less costly than you traveling. Working anywhere will give you a source of income apart from your EPF and PPF. All these can be factored in while planning for retirement and one can decide on an ideal age based on this.
This basically means know what your incomes and expenses are during retirement. What are your current investments and will they be sufficient to cover your expenses post-retirement? Most of the time it’s the money that decides the retirement age and now us. If the current investments do not cover your expenses after retirement then make an investment plan and start investing immediately.
Most of the time the health of a person forces them to retire at an early age. Or if a person who plans to retire after the age of 65 might have to face heavy healthcare expense as the employer might not provide insurance to people aged above 60. Factoring in health and calculating accordingly will give you a rough estimate about when to retire.
Deciding on retirement age is not just dependent on these three factors. The number of people dependent on him/her, financial stability and lifestyle are few of the many other factors that help one decide on the retirement age. Ideally, in India, people do work up until the age of 60 or 65 but with the long working hours and routines in a job, people can be tired mentally and physically. Switching jobs is always not an option with high unemployment rates. Also after 50, it gets difficult to find a new job too and there won’t be much potential in the existing job. So it is important that people usually plan their retirement with the retirement age of 50 in their mind instead of 60. Well, there is no harm to be able to retire late with excess money if one decides that they will not retire at 50.
Start your retirement planning today with Upwardly! With a plan in place, retirement doesn’t sound as dreadful as it is portrayed by others. Happy investing! Happy retirement!