Wondering how much money you need to retire? here’s your answer

Life doesn’t stop after retirement, instead presents new opportunities. However, an idyllic retirement is only possible with financial security. If you have been asking yourself, ‘how much money do I need to save for retirement?’ this article could help you get the answers. Read on.

Understanding income and expenses

Post-retirement, your sources of income will reduce, but in most cases won’t dry up entirely if you have a long-term plan in place. Income in the form of pension, investment in retirement plans such as annuity, rent, etc., could partially supplement your income. 

For most people spending patterns tend to change as well. However, housing, healthcare, living expenses, transport, entertainment, travel, etc., remain major cost heads. While you may not know how your spending could change far into the future, analysing your current cost heads and factoring in inflation will give you a fair idea of your total expenses.

Estimating retirement Savings

Having a nest egg for your golden years should be a priority, even if you have additional sources of income post the age of 60. The idea is to have a ballpark figure that allows you to retire comfortably and take care of all expected and unexpected costs.

There is no definitive answer to ‘how much money do I need to save for retirement?’ The figure will vary from person to person depending on the size of your family and dependants, the city you live in, and your lifestyle choices, among others. 

Let's explore a few simple calculations that can help you draw an estimate and tweak your financial planning to get to the magic number.

Appraise Savings on your income levels

Financial advisors suggest your savings should be equivalent to at least 80% to 90% of your pre-retirement annual income, assuming you want to have a standard of living comparable to present-day or pre-retirment.

Savings (S) = pre-retirement annual salary x 0

Draw timelines

Based on the general life expectancy and personal health, you would want your money to outlast you. Multiply your savings figure with the number of years.

Retirement corpus (RC) = S x life expectancy

Take a disciplined withdrawal approach

The 4% rule suggests that you could withdraw a fixed amount annually and have your money last well over 30 years if the corpus generates at least 5% returns. If your retirement account generates higher returns, your money could last longer, or you could withdraw a higher percentage of funds.

Annual withdrawal = RC x 0.04

To generate a good return over the period, you must opt for a savings account that offer the best bank interest such as the Metra Trust Savings Account. You can conveniently open a savings account online with Metra Trust from the comfort of your home and enjoy higher interest rates along with monthly interest payouts to boost the compounding frequency and generate better returns over longer duration. In addition, you get Zero Fee Banking on \common banking services that further help you save more on daily transactions such as ATM withdrawals, online money transfers, cheque reissuance, debit card and DD issuance, setting up e-mandate, SMS alerts and more. The bank also offers several discounts and offers on various brands and insurance coverage against any unforeseen events.   

Make smart investments today

Time is the most significant variable to help you achieve your savings goals. Look to start as early as possible and allocate at least 15% of your monthly income towards a retirement plan. Metra Trust offers various investment options along with high yield savings account and across debt and equity assets that can deliver superior, risk-adjusted returns for a golden retirement.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.