Will your savings be enough on your retirement? Know how to plan a retirement?

Will your savings be enough on your retirement? Know how to plan a retirement?

It’s a common question everyone wants to figure out – Will my savings be enough for my retirement? Or how much should I save in order to have a worry-free post-retirement life?

If you are able to discover the answer exactly, your worries for your retirement would probably disappear but do you think planning your retirement is simple? The answer to this question is “No” because you can’t predict your future. You may be bound by such circumstances that might ruin your retirement goals but you can forecast your retirement i.e. you can get very close to your retirement saving goals.

Here are the 4 things to keep in mind for your retirement planning-

Future Spending

The most important aspect that you need to keep in mind i.e. your estimated future spending based on your income and current spending. You need to focus on projecting your retirement spending.

To calculate your future spending, firstly you need to calculate your monthly expenses and give a thought will your monthly expenses grow or remain same or go down.

Now create of list of expenses at your retirement i.e. your estimated retirement expenses and you will have a rough idea of your monthly spending needs or you can calculate the expenses in the first year of retirement using the retirement planning calculator.

This would give you a rough idea of the amount you need at your retirement to live a worry-free life. You should also calculate a rough figure of your pre-retirement income i.e. the average amount of what you expect to earn in the 10 years leading up to retirement.

Investment Returns

The investment you do now will have to give you a fruitful result at your retirement. The traditional investment options are there such as fixed deposit, recurring deposit, NPS and savings account etc. which give an interest of sub 8% with no risk involved. Other investment options such as mutual funds or P2P lending can be good investment strategy as you can easily get returns up to 25% on an average with a minimal risk involved. P2P lending is at a very nascent stage in India but emerging as an alternate asset class. You can lend money to others and easily manage to generate returns up to 25% with a minimal risk involved. You can lower down the risk approximately to zero by diversifying your assets. So plan your investment effectively so that you can generate the maximum return out of it.

Inflation in India

“Inflation rate in India averaged 7.12 from 2012 until 2017, reaching an all-time high of 12.7% in November 2013 and a record low of 3.17% in Jan 2017” as quoted by trading economics. So while planning for your future needs, you have to use inflation adjusted targets.

Savings Rate

On the basis of your income and budget figure out the amount that you are saving per year. This is important to focus on because it’s only thing that you can control. Challenge yourself aggressively from the start because it often does not get easier as you get older.

So plan your retirement from now because “Short term gain will result in long term benefits”

Source: Get Rich Slowly