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  • Category: Miscellaneous

    How much is necessary?

    Over the years, medical facilities have improved a lot. As a result, the life expectancy has been increasing. Nowadays, we frequently see many people crossing 80 years. Even people above 90 are not that rare. But at the same time, the cost of living has been increasing by leaps and bounds with the rate of interest of deposits is showing a downward trend.

    So, it has been imperative for all of us to save for our twilight years. But how much should we save? Earlier, people used to assume that they would live another twenty years after their retirement and save accordingly. But as the life expectancy has been moving up and the rate of interest is going down, we have to take retirement savings more seriously and have to save more for a longer period after retirement.

    So, I want to know: How much is necessary to properly sustaining ourselves after retirement? How much should we save for our twilight years? How long will we survive?

    Your opinion, please!
  • #651106
    Minimum twenty times one's annual expenditure should be one's retirement corpus.
    When you talk, you are only repeating what you already know. But if you listen, you may learn something new!

  • #651112
    For a couple if they have their own house, another twenty five thousand rupees for month on average is required. So annually three lakh rupees are required. So if you deposit fifty lakh rupees FD in the bank, you may get about four lakhs interest per annum at the rate of eight percent rate of interest. Another ten lakhs for any other requirement if you add it will become sixty lakhs. So an amount of sixty lakhs in the bank may be the right amount. I think this is the most conservative way of calculation.
    But the requirement may change with your standard of living. For a normal family my calculation may hold good.

    always confident

  • #651115
    What we need is to have a roof, some clothes to cover, and some good food to be hunger free. One should have their own residence or a sum to pay as rent. To buy decent clothes as formal and informal wear once or twice in a year. Very simple old age three-time meal for every day. Some sum for conveyance. Some money to gift to the near and dear as and when needed.

    In Toto, I would say that a person needs to save 15 years salary To lead his retirement life peacefully.

    Supposing a person's last drawn monthly salary is Rs - 30,000/-(Thirty thousand), their pension amount would be Rs 15000/-. (50 percent of their last drawn salary) To earn the same pension amount regularly every month as interest after their retirement (15000 x 12 = 1,80,000) which should be 8 percent of a sum they should Invest as a capital sum of Rs. 22,50,000 = (180000 x 100/8)

    Therefore the saving should be 75 months last drawn monthly salary. (30000 x 75 = 22,50000) Thereafter his family survivors (wife and children)would enjoy their life with the man's hard saved money

    No life without Sun

  • #651116
    For working out the corpus required for ones survival the inflation is to kept in view. This is an important factor and silent killer of our capital and many seniors find one day that they are devoid of any funds with them.

    We have to assume a very general and average living standard of a middle class person who requires about Rs 30000 per month for his basic needs. We are not considering luxuries here as the richer ones can always have them without considering any calculations.

    Now, to get this much money every month one should have a saving or corpus of around Rs 60 lakhs. Now the interesting thing is that this capital of 60 lakhs will be diminishing every year in its value depending upon the inflation which could be anything in the range of 4 - 10% as on an average seeing the past trend. Let us say it is 6%.

    To compensate for it the capital should be more so that even after 15 -20 years one is able to get a sufficient monthly income which is equivalent of Rs 30000 today. If we calculate the equivalent of Rs 30000 in terms of purchasing power after 20 years we get approximately Rs 100000.

    Hence the capital at that time should be about 3 times more than today say approximately Rs 1.6 crore.

    So a person should have a capital of much more than Rs 50 lakhs today so that the remaining money from the interest, after the expenses, multiplies to 1.1 crore (1.6 - 0.5) in 20 years.

    Using a recurring deposit calculator you can find out that every month extra Rs 35000 interest is required to build that fortune. So the present corpus required to sustain for 20 years will come as Rs 1.1 crore.

    So for living an average middle class life for a hopeful longevity of 20 years requires a present corpus of Rs 1.1 crore. These are approximate calculation and one can fine tune it to as per his or her financial status.

    Knowledge is power.

  • #651117
    Thanks for the informative responses. However, I think that retirement planning depends on various factors. It is very much necessary to settle the child/children before retirement. Then the financial burden after retirement would be comparatively less. Secondly, if the person and his/her spouse is covered by any health scheme (for example, Central Government Health Scheme), then the financial planning would be definitely different.
    Beware! I question everything and everybody.

  • #651120
    These days the medical expenses are more and it shall increase in future too. Therefore we should have a medical insurance to cope up with the expenses that may occur when we grow old. Also if we have our own home then it would be better as then we avoid the house rent which is increasing day by day.

    I think we should save one third of the earnings we do annually. If you are employed then you have PF to take care of you in the future.

    Also it is advisable if we invest in properties so that we may give them on rent and may have some rental income when we get retired from the job.


    " It is better to be hated for what you are than to be loved for what you are not" ... Andre Gide

  • #651141
    Mr. Gupta has raised a valid issue on medical insurance. But how many companies provide health insurances for very old people and premium of such insurances covering very old people are important issues for consideration.
    Beware! I question everything and everybody.

  • #651144
    @ Partha most of the companies do that till the age of 65 years yes premiums are high. Need to check how much is the premium after age of 65 years. Let me Google that.

    " It is better to be hated for what you are than to be loved for what you are not" ... Andre Gide

  • #651146
    Being unknown of the fact of our span of years go for as much as you can save so as to not to feel the need of begging in front of someone else. There would be a good arrangement if we manage to keep up with a consistent salary even after retirement along with some FD & SIP investments then the life would be comfortable enough to pass the same in peace with resourceful.

  • #651153
    @Vedprakash this is tough to have a consistent earning after the retirement as people don't get that much salaries these day so that they may invest some good money for retirement plans. I am worried for my old age as I too have a private job and don't how will I survive when I'll get retired from the job.

    " It is better to be hated for what you are than to be loved for what you are not" ... Andre Gide

  • #651166
    Considering the current rate of inflation and the way medical facilities are going out of reach of common man it becomes imperative that one must save as much as possible for the old days and also to try continue working even after retirement so that inflow of money does not stop no matter how small the inflow is.
    If you have 20 years left for retirement and current inflation is 7% and if assumed that it will remain the same for next 20 years then, it is for sure that the things will be around 300% costlier than today. This is total assumption keeping all factors remaining same but many things will change and it is not necessary that everything will be the same after 20 years as it is today.

    One must fulfill his worldly duty by 55 years and also ensure that his/her child are settled before he/she retires. One must save as my child possible and reduce his expenditures to the extent possible, also moving to a smaller city is a very good way to save on unnecessary expenses as metros and big cities are quite expensive even for daily need items and commutation.

    But in the end change is inevitable and how hard we try to keep things as simple as possible as per our needs, they may not workout as planned. Future is uncertain and that's its beauty. Do good today tomorrow will be better.

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