How Millennials Can Plan for Their Retirement Corpus with a Retirement Calculator
Mitali Dhoke
Jul 01, 2022
Listen to How Millennials Can Plan for Their Retirement Corpus with a Retirement Calculator
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When you are young, thinking about retirement planning may not be the millennial way to spend your time, but if you consider it, you may see that it is worthwhile. You will need a certain amount of money in the future to support a comfortable retirement when there is no stable source of income, just as you do now to maintain your current lifestyle, which includes shopping, travelling, and buying the latest digital devices.
Most millennials give greater emphasis to their short-term financial goals and immediate lifestyle expenses when they first begin their earnings journey in order to satisfy their need for instant gratification. Instead, you should practice delayed gratification and save more to invest wisely. If you are a millennial, retirement may seem like a faraway financial goal that can be accomplished in the final years of your working career because it's still 20 to 35 years away.
However, you need to maintain an adequate post-retirement corpus to offset the aggressively rising living costs, increasing life expectancy, rising healthcare expenses, and the absence of any social security for the elderly. If you don't start investing now, it may be nearly impossible to maintain a good lifestyle in retirement. It is high time now that millennials realise the importance of saving and investing early for a better life after retirement.
The world is changing swiftly, and so are the trends in financial planning. Gone are the days of the old-school thought when people would dedicate their entire career to an organisation and then retire with a huge pension and gratuity. Today's fast-paced millennial generation is thinking about choosing an early retirement in the future to follow their passion and life goals.
Retirement is a time when you can finally unwind and realise the much-awaited "golden sunset" goals for which there is a need to be financially well-prepared. However, with no steady income in hand post-retirement, you could be at the risk of not leading the leisure years the way you wished for. Hence, by focusing on the current and possible future expenses, smartly plan to invest in retirement-focused mutual funds that can help accumulate an adequate retirement corpus.
Retirement funds are specialised investment plans with a long-term perspective that enable you to save money for retirement in a systematic and disciplined way. You periodically contribute a set amount of money to the plan in order for it to amass a sizeable corpus of funds by the time you retire. Hence retirement planning becomes essential right from the age one starts working. The earlier you plan for retirement, the better the chances to accumulate the needed corpus.
Given that, the biggest risk of procrastinating your retirement plan is that you may not be able to build a sizeable nest egg for your retirement needs. In order to retire rich and lead a carefree life of leisure after retirement, you should aim for an effective retirement plan.
PersonalFN believes that to Retire Rich, following a prudent approach is essential, plus the investment strategies you choose should be suitable and efficient in order to build up enough wealth for your golden years. In this article we will help you understand how to plan for your retirement using a retirement calculator.
Fortunately, millennials have time on their side, and when it comes to saving for retirement, time is a great asset. Creating a retirement corpus is a long-term financial goal spanning over decades. Equity is the most suitable asset class for meeting long-term financial goals as equity tends to beat other asset classes and inflation by a wide margin over the long run.
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A secure and profitable way to invest indirectly in the equity market is through mutual funds. SIPs are the best part of using mutual funds to build a retirement portfolio. The biggest benefit of SIP is its ability to utilise the power of compounding. Additionally, it aids in rupee-cost averaging, relieving the investor of concern over volatility. One of the finest ways to save for retirement is through mutual fund SIPs because you don't have to compromise on other goals in order to achieve your retirement goals.
Harnessing the power of compounding through reinvesting the returns of your investments in retirement funds can have a significant multiplier effect and provide you with the required corpus at the time of retirement. For example, let's assume you invest in retirement-oriented mutual funds via the SIP route with an expected annual return of 10%. The table below depicts an individual's accumulated retirement corpus at the age of 60 years:
| Investors |
Monthly SIP (in Rs) |
Age (in years) |
Years until retirement |
Total investment amount (in Rs) |
Accumulated corpus via SIP (in Rs) |
| Rahul |
5,000 |
25 |
35 |
21,00,000 |
1,91,41,384 |
| Tarini |
5,000 |
30 |
30 |
18,00,000 |
1,13,96,627 |
| Vihaan |
5,000 |
33 |
27 |
16,20,000 |
82,97,083 |
| Tanya |
5,000 |
27 |
33 |
19,80,000 |
1,55,75,375 |
(Source: PersonalFN Research)
This table is for illustration purpose only
[ PersonalFN's SIP Calculator]
As you can see from the table at the retirement age, Rahul has amassed a corpus of over Rs 1.9 crore, which is larger than the rest of the group. The main reason behind this is that Rahul began his investment in retirement fund via SIP mode at a young age and invested in equities for the long term. This allowed him to benefit from the power of compounding despite market fluctuations.
Saving for retirement is possibly one of the most important financial goals for millennials. And knowing how much to save or apportion towards building your retirement corpus will help during the pre-retirement phase, i.e., the accumulation stage. So, how does one decide how much to save for retirement?
A retirement calculator is a tool that makes it easy and relatively simple to plan for retirement. It is an online calculator that aids in calculating retirement corpus. It is preferable to start saving for and investing in the suitable retirement funds necessary for a stress-free lifestyle after retirement. The retirement calculator helps in figuring out how one needs to grow their wealth before retiring.
How does a retirement calculator help in retirement planning?
Retirement Calculator helps in understanding how much one would need to ensure an adequate amount for effective retirement planning. Find out how much you need to save by your targeted retirement date for easy and hassle-free sunset years of your life. However, the online retirement calculator requires some basic inputs from your side.
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Your current age
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Your retirement age
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Life expectancy (in years)
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Expected Inflation rate
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Expected return on investments
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Your current portfolio size (existing investments are also assessed to understand how much more needs to be invested to attain financial independence during retirement)
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Expected retirement expenses (monthly/annually). It determines the future value of these expenses (household expenses, monthly rent, healthcare and vacation etc.). Using the inflation rate, the calculator estimates the future value of these costs.
And various other financial information that will aid in producing a precise result on the amount you should allocate today and invest in mutual funds via SIP to attain the future value of your retirement corpus.
The RBI, through its recent circular, has announced Series I and Series II of the Sovereign Gold Bond Scheme 2022-23. Under the scheme, there will be a distinct series (Series I and Series II) for every tranche.
PersonalFN's Retirement Calculator is one of the most valuable online tools. It will help you draw a map for your financial plan under a few assumptions. These assumptions are then converted into projections. You can account for factors like inflation, the growth rate of your investments (both before and after retirement), and many more. The calculator provides a clear picture of how much money must be saved or invested each month to reach post-retirement financial goals.
Retirement planning can be a daunting task if done manually. One has to decide their expenses and the age of retirement along with the future value of expenses and the current inflation rate. However, the online retirement calculator factors all these in and calculates the amount required after retirement within seconds. Tech-savvy millennials can simply start their retirement planning as soon as possible by entering the few details required by the online retirement calculator at their fingertips.
It is never too early to start planning for your retirement. Once you have calculated your retirement corpus and know how much to save, you have taken the right steps toward retirement planning. As a millennial, you should now make the most of your time by making wise investments in tools that can help you create inflation-beating returns and attain your targeted retirement goals. Once you start, continue investing for your retirement in a disciplined manner. This is where suitable retirement plans can play an integral role as they help you create the desired retirement corpus and offer a blissful retired life.
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It is an exclusive service with the sole intent of securing your retirement. As a privileged subscriber of Retire Rich Report, you will get inside access to THREE strategies to build retirement wealth. You need to pick the one that suits your age and time horizon.
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Warm Regards,
Mitali Dhoke
Jr. Research Analyst