May 21, 2024

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Build wealth for your golden years with a retirement calculator

retirement calculator

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Every person has different goals and dreams for their golden years. For some, it is foreign tours full of adventures, while others desire to create precious moments with their loved ones. Pursuing hobbies is also a common retirement goal. However, to make these beautiful dreams come true, you must save, invest, and start building wealth for retirement early.

It is not easy to build wealth, but it becomes more difficult when you don’t have a plan. This is where retirement calculators help. Whether you are in your 20s, 30s, or even 40s, retirement calculators help you make smart decisions today to maximise savings tomorrow.

Here is how retirement calculators work and the benefits they offer to secure your golden years financially.

What is a retirement calculator? An overview

Retirement calculators are user-friendly digital tools that help individuals plan their retirement. These calculators are available online and analyse various financial aspects to generate personalised projections for your future.

Retirement calculators use precise data, such as your current age, desired retirement age, annual income and its growth, current savings, expected expenses, and inflation rates. These details help to estimate how much money you will need during your retirement years and the amount to invest to reach the target.

For example, a 30 year old investor aims to retire at 60. They have Rs. 12,00,000 annual income, Rs. 5,00,000 as savings in mutual fund investments, and Rs. 40,000 monthly expenses. The calculator would suggest that they need Rs. 10.36 crore to fund their retirement. Moreover, Rs. 63,959.16 is needed every month for 30 years.

How does a retirement calculator help you build wealth for your golden years? 

  • Helps in planning retirement expense

Once you estimate the amount required post-retirement, you can plan and prioritise expenses accordingly. You can categorise expenses into essential and non-essential and allocate funds accordingly. This proactive approach helps you spend responsibly and save enough for your golden years.

  • Helps to analyse investment strategies

Retirement calculators allow you to explore different investment strategies actively. By adjusting contribution amounts and investment types within the calculator, you can observe how these changes impact your retirement savings over time. This analysis helps develop a strategy so you can save and invest for retirement more smartly.

For example, you might consider allocating a portion of your savings to debt mutual funds and another portion to stocks or equity mutual funds. With the retirement calculator, you can experiment with varying percentages to see how each allocation affects your projected retirement corpus.

  • You can maximise your savings

Retirement calculators go beyond simply estimating your existing savings. They also help you understand the impact of different saving rates and assess how even small increments in your savings can lead to substantial growth over time.

Let’s assume Mrs. Sneha, aged 30, plans to retire at 60 with a monthly income goal of Rs. 30,000 during retirement. She currently saves 10% of her income and also makes investments in mutual funds. When she uses a retirement calculator, it shows her that by increasing her savings rate by just 1% each year, she can create a higher retirement corpus.

  • Future correction and flexibility

Life is unpredictable, and financial circumstances can change. Retirement calculators offer flexibility and let you make adjustments whenever necessary. You can modify variables like retirement age, savings rate, or expected expenses to adjust your strategy and keep your retirement plan on track.

Let’s suppose you receive a 20% salary hike. You can use the retirement calculator to understand the impact of this additional money on your retirement savings and revise your plan accordingly.

Ending note

A retirement calculator simplifies the complex process of retirement planning. It helps you visualise your future and make adjustments as necessary. This tool is especially helpful if you want to retire comfortably without worrying about financial problems. By personalising your strategy and making strategic decisions, you can enjoy financial freedom and live the retirement you have always dreamed of.