How to Use Pension Calculator?
An online calculator is a smart way to get a detailed overview of what your retirement portfolio should look like by the time you retire. Please read this post to know how you can use it for smart retirement planning.
After working hard for several years, you’d want to live your retirement years just the way you want. But finances play a significant role throughout our lives, including our post-retirement years. Hence, retirement planning becomes essential.
With no monthly salary from your employer, it is only with the help of smart planning that you can live the retirement of your dreams. A pension calculator is an excellent way to start planning for your retirement. It provides you with a detailed summary of how your ideal retirement portfolio should look like.
Here are a few essential things you should know about a pension calculator-
1. Personal Details
The first step on this online calculator would be entering personal details. You will be asked to enter your current age and the age when you’d like to retire.
The online tool lays the foundation of your pension calculation on your current and desired retirement age to provide more accurate results.
2. Income Details
The next step is to enter your annual income and your expected income growth rate. The calculator will use this detail to estimate how much you will be earning over the years by the time you reach your retirement age.
Avoid overestimating the income growth rate as it can affect the accuracy of the results.
3. Savings and Investments
Next is entering details of your current savings and investments. When entering your savings, make sure that you do not include the ones that you have earmarked for other goals. For instance, your savings for long-term goals like a child’s education or marriage should not be taken into consideration.
Regarding investments, you can choose from options like equity, bank FD, and mutual funds/ULIPs. The calculator will consider average returns from the selected investment vehicle to calculate your retirement corpus.
4. Current Expenses
Expenses can vary significantly based on factors like lifestyle, income, and even your current city of residence. Also, many of your current expenses might continue even after you retire, which makes it essential to take them into account.
You can either enter the total monthly expense or break it down into categories such as bills, food, clothing, lifestyle, transport, etc.
5. Retirement Corpus Summary
Based on the details mentioned above, the pension calculator will then provide a comprehensive summary of how much your retirement corpus should be by the time you wish to retire. The calculator will also consider inflation and interest rate to increase the accuracy of the results further.
The summary will help you understand how much your savings will be by the time you retire and how much additional funds you will need to live a financially stable retirement. It will also provide details of how much you will have to start saving every month to reach your retirement goal.
Planning Retirement with a Pension Calculator
Based on the results generated by the calculator, you can then start planning your retirement. You can consider options such as pension plans, term plans, life insurance, ULIPs, and more to achieve your retirement goals.
Start planning your retirement from an early age so that you have adequate time to save, invest, and build the retirement of your dreams.