How Much Do You Need To Save

Retirement is a ticking bomb and many of us do not even recognise this. Most individuals, especially those who are not employed in an organised sector, do not have the foggiest idea of where to start. Generally, we hope that our savings will help us to enjoy a comfortable retirement period. However, it is not just the predefined expenses, but a number of factors that determine the amount required at the time of your retirement. The inflation rate, your standard of living, and your current age are some of the determinants that play an important role in shaping your savings for retirement.

Mentioned below are some of the important factors that will help you in deciding how much to save for retirement.

Retirement Age: This is the age at which you plan to retire. It depends on a lot of things. For some, early retirement is the goal and they believe that they should retire when they have enough bank balance. However, for many others, there is no such thing called retirement, as they enjoy their work or job very much. Nevertheless, many of us, who are employed in organised sectors, do plan for the age, when they would want to retire.

Years in retirement: When you are planning for retirement, it is not only the age, at which you plan to retire, is important, the years remaining for the retirement are equally important. So, if you are at the age of 35 and have your retirement age set at 60, there are 25 years in between, when you will be fending for yourself. And these are the same years when you need to save and invest for your retirement. That is why it is always suggested that you should start investing early.

Estimating future returns: Estimating the future returns on your investment is the most important task, as it will help you to determine all of the variables, you will need to use as input to help you determine approximately how much you will need to fund your retirement.

Inflation: Inflation is something that erodes the future spending power of current assets, so you need to account for inflation in your calculations. You can always use general inflation; however, it is recommended that you use the personal inflation for retirement planning since the personal inflation, which is related to you and your lifestyle, maybe much different from the general inflation.