You are probably wondering how to calculate your retirement corpus. Should you choose an online gratuity calculator or just stick with the numbers your friends are choosing? Is it a lifetime or annual pension? How old must you be in order to access your entire retirement corpus? What happens if you’ve over-contributed to the fund and can’t withdraw money from it? Finding the answers to these questions isn’t easy, so read on for some of the best information out there on how to calculate your retirement corpus.
- Work Out the Number of Years You Have Until Retirement
The first step in calculating your retirement corpus is to work out how many years you have until you retire. This period can vary depending on your circumstances, but it typically ranges from 5 to 30 years. For example, if you are 35 years old and plan on retiring at 65, then the number of years in this calculation will be 35 – 65 = 20.
- Account for Inflation
The next step in calculating your retirement corpus is to account for inflation. This means that instead of just working out what you would have earned if you were earning 100K today, also include what you would have earned if that same amount was worth 100% more tomorrow! To do this, simply multiply your annual salary by 1.15 (or whatever percentage represents how much more it would be worth).
- Estimate Your Annual Expenses Post Retirement
You need to estimate how much money will be required for your annual expenses post retirement. Take a note of these example figures to see how to make this calculation: If you expect to retire at age 65 with a 1 million capital base, then you’ll need to amortize 100,000 of that sum each year for the first 30 years (assuming an 8 percent return). If you want to live on a fixed income of 40,000 in retirement, then you’ll need to amortize an additional 80,000 of your capital base annually. While deciding the annual expenses you should take into account the life expectancy. The average life expectancy of a human is about 70 years old.
- Choose Your Investment Avenues and Expected Return
One of the best ways to estimate how much money you’ll need in order to live comfortably is by looking at the expenses associated with your lifestyle and then subtracting them from your monthly income after retirement. You can then use this number as a basis for determining how much money you’ll need in order to retire comfortably.
- Prioritize your investments
It is extremely important for calculating your retirement corpus is to prioritize your investments. Decide which are the most important, such as those that provide higher returns or those that are tax-free. You can also consider how long you intend to retire for and how much income you will need in retirement. Then, make a list of all the investment options within each priority level and determine which ones are appropriate for your situation. When making decisions regarding investments, always use reliable calculators like epf pension calculator. Avoiding manual calculations will ensure your estimates are accurate.
- Life Expectancy
The most important assumption is your life expectancy. Life expectancy is the number of years you expect to live after retirement, assuming a certain lifestyle and investment returns.
- Get an adviser
If you’re not sure if you understand how much money you’ll need for retirement, talk to a financial planner who can help figure out what your retirement corpus should be.