One of the most important figures that most people are curious to find out is how much retirement corpus they will need to lead a comfortable retirement life. The corpus requirement varies as per the state of life you are currently in and the time left for your retirement. One of the best ways to figure out the desired corpus is to follow your expense pattern and factor in inflation. However, return on your corpus will also play a major role in deciding your final corpus amount. Here is how you can figure out your suitable retirement corpus while you will also need to mind various factors that will influence your retirement planning:
How much corpus you need for 25 years of retired life
Your risk appetite will come down
The source of income becomes nil or very low for retirees with no option but to depend on their life savings for most expenses. "Things get complex when people are left with only source of funds for their bread and butter. Risk appetite starts squeezing. People get 'risk averse' when it comes to investing in those investments that possess a high risk-o-meter or refrain from investing in new ventures in order to avoid turbulent time," says Mehak Tomer, CEO, INVEST19.com. In such a scenario capital protection becomes one of the primary objectives when you consider an investment. This happens because your ability to cope up with any loss of capital is limited, especially when you have no other source of earnings to compensate for the loss.
Lower return on retirement corpus
With limited risk appetite, retirees prefer investment options that protects their capital. "The retirement corpus is known for providing regular and riskless returns, so the question of higher returns will be ruled out," says Tomer. This is the reason why the government-backed small savings scheme and fixed deposits in banks are the most preferred options for senior citizens. However, these safe options give only moderate returns that only compensates for a rise in inflation, which means the real value of your corpus does not grow when you go for such investment options. Either you create much bigger corpus or take risks for higher returns in the retirement phase.
Be ready for long retirement years
Good medical facilities and advanced technologies have led to significant rise in average longevity of Indians in their retirement age. As per last census data, the life expectancy of a person at 60 years of age is another 17.9 years. The longer you live the more funds you will need as retirement corpus. With growing age many people face increased medical complication and disabilities, which may require special treatment and regular care. Therefore, the expense will not be limited to lifestyle but also the increased medical and other professional service cost. Therefore, planning for only 10-15 years may not be sufficient as you will have to be ready with a corpus that can help you lead a comfortable life during long retirement years.
Planning for spouse's retirement
On average, female in India live longer than their male counterparts. While a male aged 60 has life expectancy of another 17 years, it is 19 years for a female of the same age. If there is an age gap between the spouses, it adds up to the time when the surviving spouse may have to live alone just with the help of retirement corpus.
Start saving early for comfortable retirement
Given all the limitations that old age may throw at you, it is always advisable to save good retirement corpus before you retire. Since the corpus needed is significant, you cannot save it in a short time frame. Therefore, the only way to lead a comfortable retirement life is to start early with regular savings and be disciplined about it.
Various modes of savings
You already have statutory savings if you are a government employee or employed in an organised sector. You may either be having EPF/EPS or NPS. Some people also go for PPF for regular savings to build retirement corpus. Besides these fixed income options, you can also look for equity investments through SIPs in mutual funds as they are known to provide higher returns in the long-term.