Retirement planning involves preparing your finances for life after you stop working. It’s ideal to start early to stay ahead of inflation, which reduces the value of money over time. A solid plan includes estimating retirement expenses, setting a time horizon, understanding your risk appetite, and choosing tax-efficient investments to ensure a comfortable lifestyle post-retirement.
A retirement planning calculator is a utility tool that shows you the amount of money you need after retirement. It helps you to plan your investments to get the desired retirement corpus at the time of retirement. The retirement planning calculator help you estimate the amount you need to maintain your current lifestyle after retirement.
The retirement planning calculator will estimate the amount you require in retirement, the formula for which is given below:
FV = PV*(1+r)^n
Where,
Let’s assume you require a monthly income of Rs 35,000 in retirement. You are presently 35 years old and plan to retire at 60 years of age. What is the retirement corpus you need on investing the retirement savings in a bank FD which offers an 8% yield? (Assume Inflation at 6%)
Formula:
FV = PV × (1 + r)^n
Where:
FV = Future Value (income needed at retirement)
PV = Present Value = ₹35,000 × 12 = ₹4,20,000 per year
r = Inflation rate = 6% = 0.06
n = Years to retirement = 60 – 35 = 25
Step-by-step Calculation:
FV = 4,20,000 × (1 + 0.06)^25
FV = 4,20,000 × (1.06)^25
FV = 4,20,000 × 4.29187
FV ≈ ₹18,02,586
This means you would need ₹18.03 lakh per year at age 60 to maintain the same lifestyle as ₹35,000/month today.
The ClearTax Retirement Planning Calculator is a handy tool that shows the annual income you need at retirement, to maintain the current lifestyle in seconds.
Present value helps you understand how much to save today for future goals like retirement. By factoring in inflation and returns, you can plan smarter and ensure a comfortable life ahead. Starting early makes all the difference.