Are you one of those aspiring to retire early and explore your hobbies or go on vacations? OR Are you one of those thinking that there is still a long way to go to retire?? If yes to any one of these questions, this article will be an eye-opener for you. Take out next few minutes and hold your breath, go on to reading this article.
Thanks to an improved standard of living, better quality food, and better health care, Life expectancy, in general, has increased considerably. We can see many senior citizens around us in the age group of 85-90.
This means that many of these senior citizens would have been surviving on their Retirement funds for the last 25 years, with an assumption that they were retired at the age of 60. Do you know how much retirement money is required to survive next 25-30 years with the same standard of living?
There is an interesting article published in Bloomberg, which states that America’s elderly are twice as likely to work now than in 1985. In the United States, for the first time in 57 years, the participation rate in the labor force of retirement-age workers has doubled to 20 percent mark, according to a new report from money manager United Income.
The article link is given below :
These statistics are startling. It means that many of these senior citizens, unfortunately, couldn’t estimate the quantum of retirement funds required. They also would have missed counting the bigger demon – inflation.
I am sure, most of us have many aspirations such as retire early, travel across the world, take up hobbies etc but there is no or minimal preparation to reach these aspirations.
Here is the table which indicates the quantum of retirement funds required to maintain the same standard of living.
|Estimated time left to retire at 60||10||20||25||30||35|
|Current monthly Expenses||1 Lac||1 Lac||1 Lac||1 Lac||1 Lac|
|Current yearly Expenses||12 lakhs||12 lakhs||12 lakhs||12 lakhs||12 lakhs|
|Inflation adjusted expenses at the age of 60||21 lakhs||38 lakhs||52 lakhs||69 lakhs||92 lakhs|
|Inflation adjusted expenses at the age of 85||92 lakhs||1.65 cr||2.21 cr||2.96 cr||3.96 cr|
|At 8% withdrawl rate, retirement value required now||1.5 Crs||1.5 Crs||1.5 Crs||1.5 Crs||1.5 Crs|
|At 8% withdrawl rate, retirement value required at age 60||2.69 cr||4.81 cr||6.44 cr||8.62 cr||11.53 cr|
|At 8% withdrawl rate, retirement value required at age 85 (in Crs)||11.53||20.65||27.63||36.98||49.48|
|SIP required from now to reach the retirement value at 60||1,31,137||63,351||48,520||38,112||30,367|
|Value of retirement money at the age of 85||29.10||52.12||69.75||93.34||124.91|
|( @10% growth rate ) in crs|
|Note : Inflation considered at 6% & Inflation adjusted investment growth rate at10%|
Looking at the above table a 25-year-old to maintain the same standard of living require around 11.53 Crs of retirement money at the age of 60. In order to accumulate this money, he/she needs to do a SIP of 30k every month from today. The assumption in this calculation is at the time of retirement, 8% pa is withdrawn to meet expenses and the remaining amount stays invested to grow at a rate of 10% pa. This 11.53 Crs will grow to 124.91 Crs at an estimated growth rate of 10%pa.
So, Are you investing sufficiently to meet your retirement needs? These calculations are for a person to retire at the age of 60. Assume if you want to retire early, the numbers are way different and high.
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