How Millennials Can Use a Retirement Calculator to Plan for Their Retirement Fund?
For many, especially millennials, retirement investment planning is a distant goal. Yet, if you want a dignified and comfortable life later, you must invest for retirement and work towards forming it right after you start working. The government provides minimal retirement benefits, so the onus is completely on you to create your retirement fund. To some extent, retirement schemes or retirement plans in India, like the national pension scheme, employee provident fund, public provident funds, etc., can assist you in covering a bit of your retirement corpus requirement if you are a salaried individual. However, if you are self-employed, you may require looking for alternatives.
Depending on when you begin investing, different investment platforms can help you create adequate retirement funds. Besides this, other financial marketplaces have an online retirement calculator on their site, which you can use at any time to understand the required retirement corpus as per your current lifestyle and obligations after including inflation. Let’s go through the crucial tips you must be aware of for preparing an adequate retirement corpus –
Start investing as early as possible.
Many consider retirement a distant goal you may attain later in life. What you fail to understand is that investing early enables you to benefit from the compounding effect, which further helps you form a higher retirement fund with smaller investments. For instance, consider if you begin to invest through SIP in a mutual fund at the age of 25, an investible amount of Rs 3,000 per month at a rate of return of 12 percent p.a., then you would form a post-retirement corpus of Rs 1.93 crore by the time you turn 60 years of age.
However, if you start investing at the age of 50, you will require making a monthly contribution of Rs 84,000 in the same fund generating the same rate of return of 12 percent p.a. to form the same post-retirement corpus of Rs 1.93 crore. To calculate your post-retirement corpus, you must use an online retirement calculator. Using the calculator, you can better understand how small you must invest in a specific period to attain the corpus per your requirement.
Factor in inflation
Inflation refers to the rise in the cost of goods and services, which reduces your buying power. For example, if you spend a monthly amount of Rs 30,000 at 25 years of age to mitigate your monthly expenses, then you will need a monthly amount of at least Rs 2.31 lakh at the age of 60 for the same lifestyle, assuming the rate of inflation is 6 percent. Thus, avoiding inflation might infer saving less than you would need years later. This may negatively impact your retirement life and propel you to work even after crossing your retirement age to meet your daily expenses. To counter inflation, ensure to take the help of an online retirement calculator. With this, you can find the required monthly investments to build the retirement corpus of your requirement post-adjusting inflation.
Invest in equity funds
If you are a conservative investor, you may avoid investing your funds in equity funds to create your post-retirement corpus. Equity here is a better option for meeting your long-term financial goals, such as post-retirement corpus. This investment option can outperform fixed-income assets and inflation over the long term by a huge margin. In place of equities, preference may be given to fixed-income assets like public provident funds, fixed deposits, etc. Note that the return rate generated by such fixed investments has minimal potential to beat the inflation rate. Thus, you must opt for equity funds to form your post-retirement funds.
Creating a financially stable retirement life is one of the important goals you must add to your financial plan. Adding your retirement goal to your financial plan as early as possible can allow you to generate a bigger corpus with a smaller monthly investment.
Also, to accurately calculate your monthly investible amount for your retirement, use an online retirement calculator. This is because the calculator factors in inflation while calculating your monthly investible amount, allowing you to form the post-retirement corpus per your requirement.