Retirement Planning: Are you 30, 35, or 40-year-old and want Rs 75,000 a month at retirement? Here's how much you need to invest
Monthly Income Calculations: Value of money changes with time. A thing that costs Rs 100 today may cost Rs 106 a year later. So, the calculation of monthly income should be based on inflation increase.
Monthly Income Calculations: Are you 30 and need Rs 75,000 a month? The amount may appear to be quite handsome for most people. But ask yourself: Do you need that amount 30 years later if you retire at 60 years of age? If the average inflation rate is 6 per cent, let's see what the value of Rs 75,000 will be 30 years from now. Its estimated value will be Rs 13,058. So, the calculation of your future requirements should be based on average inflation increase. Based on that, we will calculate how much a person needs to get Rs 75,000 a month at 60 years of age if they are 30, 35, or 40 years old. We will also tell how much they need to invest in a monthly SIP or lump sum to get that monthly amount.
Photos: Unsplash/Pixabay
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
How do you assess retirement corpus?
You need to know the current age, the retirement age, and life expectancy. Then you need to know your current monthly expenses. At a 6 per cent average inflation rate, and assuming that your lifestyle will remain the same, you can calculate your expenses at retirement. These expenses will keep rising by 6 per cent every year till your life expectancy. You need at least that much retirement corpus. It doesn't include other financial goals post retirement.
How do you reach that corpus?
You either need to invest or generate an income source(s) to achieve the retirement corpus goal. In either case, you need to keep an inflation-adjusted return.
Stages of investment for retirement corpus
There can be pre- and post retirement investment stages. When you are working, you can invest in high-risk investments, but once you retire and need money for retirement, you can't be too aggressive and can invest in a mix or hybrid, equity and debt, or in just debt.
How value of money changes with time
It changes with inflation. A Rs 1 lakh monthly salary can be a good amount today, but at 6 per cent inflation, it will be equal to Rs 17,415, 30 years from now.
Calculation for story
We will calculate how a 30, 35, or 40-year-old can get an inflation-adjusted Rs 75,000-a-month income at the retirement age of 60. The inflation rate will be 6 per cent. The life expectancy will be 80 years. We will choose the investment route to achieve that goal.
What will be pre and post retirement returns?
The pre retirement annualised return will be 12 per cent, while the post retirement will be 6 per cent.
Value of Rs 75,000 for 30-year-old at 60?
The value of Rs 75,000 will be an estimated Rs 4,30,762 a month, or an estimated Rs 51,69,144 a year 30 years later. It means in the first year of their retirement, they need this much amount, and it will increase at 6 per cent subsequently for the next 20 years.
Retirement corpus to achieve target?
The estimated retirement corpus to achieve the target will be Rs 10,33,82,880.
What will be lump sum and SIP investment to achieve goal?
The estimated lump sum will be Rs 34,50,706, and the estimated monthly SIP amount will be Rs 29,288 for 30 years.
Value of Rs 75,000 for 35-year-old at 60?
The estimated value of Rs 75,000 will be an estimated Rs 3,21,890. The estimated yearly expense for such a person will be Rs 38,62,680.
What will be retirement corpus to achieve target?
The estimated retirement corpus to achieve the target will be Rs 7,72,53,600.
What will be lump sum and SIP investment to achieve goal?
The estimated lump sum will be Rs 45,44,313, and the estimated monthly SIP amount will be Rs 40,710 for 25 years.
Value of Rs 75,000 for 40-year-old at 60
The estimated value of Rs 75,000 will be Rs 2,40,535, or an estimated Rs 28,86,420 a year.
What will be retirement corpus to achieve target?
The estimated retirement corpus to achieve that target will be Rs 5,77,28,400.
What will be lump sum and SIP investment to achieve goal?
The estimated lump sum will be Rs 59,84,517, and the estimated monthly SIP amount will be Rs 57,778 for 20 years.