Planning for retirement is perhaps the biggest decision you will ever have to make in terms of managing your finances. Now, although retirement planning is good, people often procrastinate over it or get it wrong. Many are not so sure just how much they need to save, what kind of pension they need, or indeed how best to estimate future financial needs. That is where pension calculators come in.
A pension calculator is a simple tool that helps you predict your retirement future. A pension calculator assists you with having an accurate estimate of a retirement corpus, and then gives an idea of how much you have to save monthly, breaking down a rather cumbersome task.
What is a Pension Calculator?
A pension calculator is that tool that calculates how much one must save for retirement. It allows you to predict your retirement corpus based on factors considering which you can analyze whether the savings you are doing and the kind of investment strategies will give you the income you will need in your later years.
Pension calculator asks you to fill information such as:
- Existing age: The age decides how much time is still left before your retirement date, and that in turn influences the quantity of accumulation of your pension corpus.
- Retirement age: You decide the age at which you want to retire and withdraw your pension.
- Current monthly savings: You save as much as you can each month to put that into your account for retirement.
- Anticipated yearly return: The average return expected from your retirement saving, which may be determined in terms of returns from the investments you would make (stocks, bonds, or pension fund).
- Rate of inflation: What you expect as a cost of living, and this will directly influence your expenditure during retirement.
- Target amount of retirement income: This will amount to the amount one should have each month after retirement, to sustain the lifestyle.
Once you feed such data into a pension calculator, it will calculate how much you should save every month and how big your retirement corpus would be eventually.
Why Use a Pension Calculator?
- Retirement planning: Determining the amount of money one requires in retirement is often the biggest challenge to undertake when thinking about retirement planning. With a pension calculator, that is such a mammoth task. It allows you to plot your retirement savings, track how much you are achieving closer to the realization of your dreams, and adjust your saving plan if necessary.
- Accuracy in Projections: A pension calculator utilizes algorithms and statistical models that calculate precisely so you end up with a finalized accurate projection based on your input. This can be helpful to better understand long-term implications of inflation, the returns from investment, and how your savings rate will reflect against your security in the future.
- Helps you set realistic goals: Through the input for retirement goals, you calculate how much you should save towards attaining those goals. If you discover that you are not sufficient, the tool will flag and enlighten you on the need for adjustments, like raising monthly savings or working more before retirement.
- Reduces Stress and Uncertainty: Retirement is quite uncertain for everyone in life. A pension calculator helps take out much of the guesswork from retirement planning. You would be in a better position to make informed choices about your future financial requirements, thereby reducing worries about running out of money later in life.
- Customizable and Flexible: Retirement plans and goals vary from one person to another, so pension calculators can be customized to meet needs. You can make assumptions about return, inflation rates and other desired retirement incomes for multiple scenarios on your retirement plan.
Using a Pension Calculator
- Gathering Information: Accrue all necessary information to be inputted in the pension calculator, including your current age, desired retirement age, any current savings, expected returns on investment, the rate of inflation, and the amount you will need as a monthly income in retirement.
- Enter the Collected Data: Get your collected data into the calculator. You may also need to input the years for which you might live in old age. This usually gives an estimate of how much you would need for total retirement corpus based on your goals.
- Review Results: After putting all the information, the calculator will show up the result in terms of the amount of savings to be done every month to achieve your retirement dream, growth of corpus, and how inflation affects it over time.
- Tweak if Needed: Based on your estimates, you might need to tweak the savings plan based on the results generated. If the calculated monthly saving happens to be too high, you can modify your lifestyle expectations or consider alternative options that could generate a better return on the investment.
- Monitor and Update Frequently: Your retirement requirements and situation will change with time. Update your pension calculator with current data at regular intervals to ensure you are on track with your goals.
Best Pension Plans in India
Pension plans ensure you have a happy retirement. While preparing for retirement, one needs to choose the right pension plan. Based on your needs and risk tolerance, here are some of the types of best pension plan in India:
- LIC Jeevan Akshay VI: LIC’s Jeevan Akshay VI is one of the most sought-after annuity plans where one can get an income stream post retirement. The plan has various annuity options like lifetime annuity, joint life annuity, and annuity with return of purchase price.
- ICICI Prudential Smart Life Plan: This unit-linked pension plan enables you to invest in a mix of equity and debt funds that help create your retirement corpus. It allows you to choose the premium as well as the investment option as per the degree of risk-acceptance.
- SBI Life Saral Pension: This is a non-linked, non-participating single premium pension plan that offers a monthly income at your retirement. This would work well for those who prefer a simple low-risk product that provides regular income.
- Bajaj Allianz Pension Guarantee: Bajaj Allianz offers a pension plan under which the company guarantees a lump sum for the rest of your life after retirement. It offers family protection and benefits in the event of the policyholder’s death also.
- Max Life Monthly Income Advantage Plan: This is another amazing post-retirement income. Max Life has a Monthly Income Advantage Plan that covers the benefit of life insurance and any type of post-retirement income. It’s a good deal if you want protection along with a steady flow of income after retirement.
Conclusion
Pension calculators are very important in helping you make accurate predictions about your retirement future. They provide an easy-to-follow seemingly complex process of retirement planning, and give out a pretty good prediction based on several factors such as your savings rate, expected returns, and desired lifestyle.
With a pension calculator, one can even compare various pension plans in India so that the best among them is chosen for the personal needs. Some examples of good pension plans in India are LIC Jeevan Akshay VI and HDFC Life Pension Super Plus, which lay a great deal of footing for a secure retirement with financial security.