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How Much Money Do You Need to Meet Your Retirement Needs?

29-07-2022 |

Post-retirement should be a time of relaxation and peace with no worry about finances. So, to ensure financial independence in old age, you must have retirement planning on top of your priority list. But you might wonder how much you would need in your post-retirement years. The answer to this question depends on several factors.

 

Let’s find out what factors help determine your retirement needs and how you can calculate your savings for old age. Also, read ahead and learn about the different stages of retirement planning.

 

 

What is Retirement Planning?

 

Retirement planning is a process of determining the income goals post-retirement and the ways to achieve those goals. It includes identification of income sources, managing expenses and savings, making prudent investments and building an adequate retirement corpus. Retirement planning is a lifelong process. Also, it is never too late to plan for retirement, but it is better if you start planning early.

 

 

How Much Money Do We Need After Retirement?
 

 

Retirement planning is not as simple a task as it is considered to be. It requires thoughtful and well-calculated investment after a proper analysis of retirement needs and current savings. Post-retirement planning can be done by calculating your retirement needs and determining investments through a comprehensive outlook on the following factors:

 

  • Calculate your monthly expenses

    The regular payment received from your retirement planning should be enough to meet your monthly expenses. To calculate your monthly expenses after retirement, classify your expenses into permanent and temporary. Permanent expenses may be your housing, food, clothing, health and utility expenses. Temporary expenses may include expenses related to your loan, work, education, etc., which are usually paid off after a defined period.

     

  • Factor in all sources of income after retirement

    While calculating how much you need post-retirement, you must include all the possible sources of income after your retirement. This may include your pension payouts, NPS or EPF withdrawal, house property income, investment gains, etc.

     

  • Consider the time of retirement

    Usually, individuals retire after the age of 60. But if you plan to retire earlier, you will need a sufficient corpus for retirement to meet the financial needs for a significant amount of time after your retirement. Thus, retirement planning should be done according to the age of retirement. 

     

  • Consider the inflation rates

    Considering the inflation rate is one of the essential aspects while planning for retirement. Inflation leads to a rise in the cost of living, which may make your pension plan insufficient to meet your daily expenses. So, inflation adjustment in your retirement savings may help you have adequate income without compromising your needs.

     

  • Consider your health costs

    With increasing age, health complications also rise. The high medical costs may hurt your monthly pension in case of an eventuality. So, you must ensure your retirement corpus covers health costs without hampering your standard of living post-retirement.

     

  • Include recreation expenses

    The post-retirement is the golden period of life when you want to fulfil your old dreams or pursue a hobby. You may want to travel the world without worrying about rushing to work. So, retirement planning should factor in the costs of leisure activities too.

 
 
How Much Should You Have Saved for Retirement By Age?
 

It is never too late for retirement planning which can be started at any stage of life. This is how you can save for post-retirement at different stages of life:

 

  • Young adulthood (21-35 years old)

    Young adulthood is the time when you start earning. But this is also the age when you want to fulfil your dreams and live life to the fullest. Due to this, you may not save enough. But starting with retirement planning at this young age lets your investments mature. So, even if you are saving little at this age, the principle of compound interest may make your corpus grow over time.

     

  • Early midlife (36-50 years of age)

    Early midlife is a period when you have responsibilities to fulfil. You have credit card debt, mortgages, loans, and insurance premiums which may not allow you to save for retirement. But you must prioritise retirement planning at this stage if you haven’t started it in young adulthood.

     

    There is ample time to build a retirement corpus along with interest earnings. You should also consider buying a life insurance plan to safeguard the future of your loved ones in case anything unfortunate happens to you.

     

  • Later midlife (50-65 years of age)

    Retirement planning at this stage is a late investment avenue. But in later midlife, you might have paid off most of your debts, such as loans, mortgages, etc. Due to this, you will be left with more disposable income that can help build a sufficient retirement corpus. Also, growth in income at this age can offset wasted time.

 

 

 Conclusion

 

Thus, retirement planning ensures a regular income in old age, making you financially independent. But there is no specific method to calculate the exact retirement needs and savings. So, every individual should analyse their post-retirement income needs and invest accordingly.

 

You can also consider some common factors while investing in a retirement corpus, which may help you plan for old age efficiently.  Also, not all retirement and pension plans generate the same returns.

 

Understanding your needs, Tata AIA Life Insurance offers a range of retirement plans that can be tailored to suit your old age requirements. By buying these plans, you can ensure your retirement corpus remains intact. So, hurry and start investing and purchasing the right plans for a worry-free post-retirement period and retire like a boss.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Frequently Asked Questions

Can I retire early?

Deciding when to retire depends on you. But if you plan to retire earlier, you must have enough retirement corpus to meet your financial needs without any shortfall in money later. 

Why should I do retirement planning?

Retirement planning helps in meeting financial needs when you stop working. It helps provide a steady source of income in old age, which leads to financial independence, making you enjoy old age without any financial stress. 

Do I get tax* benefits on retirement plans?

Yes. Investing in retirement plans offers tax* benefits. But, the extent of tax* concessions may vary according to the investment plan. So, before choosing a retirement plan, compare the tax* benefits along with the pension plan benefits.

Disclaimers

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.