Before considering retirement, there are various questions that pop up in the mind of a lot of people, like how much money is enough for retirement?
Can a person retire early? How will a person maintain the standard of living after retirement?
And lots of more questions pop up in a person’s mind. People, particularly in India, are scared of retirement because there is no security system for old age people.
So it is important to plan for a decent life after retirement.
How much money is enough to retire in India?
We can assume this with an example, so let us assume that Sanjay has a monthly expense of Rs 40,000, which includes the bills for fuel, clothes, doctor’s fees, children’s education fees, and much more.
Right now, he is around 30 years old, and he plans on retirement at 50, so he wants to calculate the amount required by that age.
How to calculate the amount required for retirement?
By the time Sanjay wants to retire, there will be no requirement for children’s education because they will be settling in their lives. Some expenses related to children and other expenses like petrol and all will be reduced.
The expenses like servants, doctors, and others will still be there. If he plans on traveling after retirement, then even those expenses will be added.
So considering all the situations, Suresh will require the same amount if he plans to retire at 50.
What will be the value of 40,000 after 20 years?
Inflation is a risk component that reduces the power of purchases. If we assume moderate inflation at 6%, then Sanjay requires Rs 1,28,000 per month when he will be 50 years old.
So, today’s Rs 40,000 will be Rs1,28,000 in 20 years.
How much amount will be required for his retirement at the age of 50?
Sanjay should ensure the inflation-adjusted withdrawal of Rs 1,28,000 until his wife is 85 years old. The wife is three years younger than him, so it is important to make a plan of 38 years.
The amount which will be required for this cash flow is around 4.9 crores.
When to start planning for retirement?
There are many people who ask this same question, and the simple answer to this is that retirement planning can be done after 40 years or so.
If Sanjay is planning for retirement at the age of 35 years, then his monthly expense will be Rs 65,000, which will be around 2.9 crores in 15 years.
Retirement planning has to start at a very young age so that it becomes easier later and makes you save enough money for your life after retirement.
The investment will always help you in gaining more, which will be beneficial for your life after retirement.
Start thinking about retirement planning if you want to retire at 50 before it gets too late.