1 min read.Updated: 02 Aug 2020, 11:40 AM ISTAvneet Kaur
What if you outlive the number of expected years or, if the annuity rates come down at the time when you retire
Be conservative when doing calculations for your retirement
₹1 crore or ₹5 crore - What is your dream figure to retire comfortably? Well, picking a random big number might give mental satisfaction but it need not provide you with the desired comforts throughout life after you retire from work. The two major hurdles while planning for long term goals are inflation and taxes. You cannot avoid either but you can factor in 'inflation' by working on real numbers.
It is important to do the real calculations so you do not fall short of money later. Remember inflation is a monster which is eating up your return on investments every single day.
No one size fits all- Every individual has to do the calculations depending on his or her lifestyle. A person has to consider factors including current standard of living, expected standard of living post retirement, assumed life expectancy or the number of years the person believes he will be alive post retirement, pending liabilities to be paid post retirement, health record and so on.
You can start by answering this question- How much money would you need if you retire today then you can add inflation for the number of years remaining for you to actually retire. This will provide you a clear idea.
If you are know how to calculate 'Future Value' of a number, you can calculate the future value of the amount you will need to retire today. You can also take help from the Future Value calculators available online.
Be conservative while doing calculations and start early
It is always better to be conservative while doing calculations towards retirement planning. What if you outlive the number of expected years or, if the annuity rates come down at the time when you retire. Yo must be prepared for such situations as well. There is no harm in saving a little extra than to fall short and repent later.