Savings for Retirement – How much money do I need post Retirement?

While planning for retirement, there are a lot of considerations which cross through our mind. We focus on the financial aspects for this article, including Savings for Retirement in India.

More or less every retiree expects a decent lifestyle after they hang up their boots.

Of course, for that, you need to sort out all your financial affairs smartly considering there are several aspects that could go wrong.

Now, question – how much is enough to sustain a prosperous life post-retirement?

The answer to this specific question, there can be a ton of other queries that we should also talk about, which we will discuss in this article. So, let us jump in.

What sort of Post Retirement Life you want?

The first obvious question of life is how you wish to lead your life after you retire.

Of course, this depends on various aspects, like How much did you earn? What kind of investments did you do? How much debt do you have?

There can be so many permutation combinations that will decide how much can you can get after you retire.

This is, of course, a hypothetical scenario where you can earn a lot of money if your planning is smart enough.

Sometimes it is not about how much you earn every month; it is about how much you can save instead. Because, ultimately, that will be the only thing that matters.

Needless to say that you should keep your debt level minimum, or better to nil; that you boost your savings to another level and by the time you retire you would have decent money to spend your life comfortably.

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When should you start Saving for Retirement?

The straight-forward answer to this specific question is – as early as possible. Of course, it depends on when you are joining a decent job.

For argument’s sake, we assume that to be around 25 years. There is a simple strategy which if you follow, you can expect plenty for you and your family.

As for the first 10 years, you will be in a phase where you must build a fitting life; we are considering that you can only manage to accumulate 10% – 15% of your salary.

Now, when you turn 35, it would be your responsibility to increase the amount to 20% – 25% of your salary till you reach 45.

After that, you should be in a position to decide when you wish to retire. Based on that, you can figure out how much you should save for your future.

So, in short, starting early is the key, and keep on maintaining will be an achievement for you, where you can relax after your retirement.

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How should you manage your recurring expenses?

One of the toughest questions to answer is how to save money as well as take care of the monthly recurring expenses at the same time.

Of course, it needs a lot of planning along with a lot of discipline with a bit of control. One key thing that you should understand is to not increase your debt level.

So, the next time you see a nice-looking car, you should resist the temptation and focus on the long-term goals that you have set already.

If you are really looking to buy a car, buy is with a purpose and plan it accordingly.

Keep your EMIs at check as well as that often leads to overspending and leaves you with minimal savings. Your goal should be to save at least 10% – 15% till you turn 35.

After that, the jobs become more tough as you should increase the saving amount to 20% – 25% of the net salary for the upcoming 10 year.

So, in control and discipline while you spent are the ways you should save money and keep your monthly expenditures at bay.

Is Savings for Retirement good enough?

The conventional line of thinking in a country like ours, when you are doing a job, people will suggest you save a certain percentage of your salary as savings for 20 – 25 years.

Then, keep that in a bank as it yields interest. Today, however, there are several flaws in this concept. You need to consider inflation here, which we believe is the biggest factor.

Of course, there are other factors like healthcare issues, recurring expenses, or any emergency payment.

So, saving money is not the only option for you. Instead, you should find a suitable earning alternative and nothing we consider better than smart investments.

Now, many people believe investing money can be too risky. Little do they know that saving money in the bank will not suffice the future inflations, let alone the emergencies.

Now, you may wonder – what do we mean by smart investment?

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Investing for Retirement is important

Please note that there is no perfect definition of a smart investment; it is rather subjective. However, we encourage you to invest in mutual funds, where you keep the portfolio ratio to 8:2.

This means you should buy large-caps of 80% and mid-caps of 20% for the first 10 – 15 years. Then, when you feel you need to retire, reverse the process for a few years as well.

If in case there is a massive drop in the market, you can also reverse the process to reap benefits and prevent losses.

Alongside any form of investment, you should also consider Systematic Investment Plans (SIPs). The money that you will spend will reap a massive return after 10 – 15 years.

The best part of a SIP plan is the monthly investment is minimal, and you will not even realize the amount it can generate for long-term.

Further Insights into Investments for Retirement

One more thing that we are suggesting which is a bit unconventional is not to invest in Endowment Insurance plans.

If it is life insurance you want, we suggest you should go for a Term Insurance instead.

The reason is simple – the Endowment policy premiums are considerably high in comparison to a Term insurance plan.

It is true you will not get any ROI, but you can re-invest the money that you can save from the premiums if you opt a Term life insurance.

One very crucial aspect that you must take into consideration is medical insurance.

Our body will not stay fit forever, and it is our responsibility to take every measure to ensure when the time comes, it gets proper treatment.

The medical expenses can eat up your hard-earned money in a matter of days. So, it is an absolute necessity to ensure you and your family with a decent medical insurance plan.

Therefore, while you are planning a happy retirement, you should never forget that this area is fully covered.

How much money do you need Post Retirement?

After all this discussion, one thing we would like to tell you, which can disappoint you. There is no practical amount bar that we can set to tell you precisely how much money you will need.

A number of factors determine that parameter, which we have already discussed today.

However, if you do the basics rights right, you should have an ample amount in your bank plus the returns of the invested amount to keep you financially safe after your retirement.

Conclusion – Savings for Retirement

So, no matter which route you choose or whatever calculation people will try to convince, the straight answer to the asked question is – you set the bar.

You will decide how much do you need depending upon the lifestyle you maintain after you retire.

However, the probabilities of a better life increase when you start planning early and execute that smartly.

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