The money needed for retirement may vary from person to person, depending on factors such as lifestyle expenses, the location where a person lives, the rate of inflation, remaining financial goals, and debt profile, among other factors. However, if you are a family of four members, you can estimate your retirement funds based on your current financial needs.
Let’s check out how much money a family of four members may need for retirement based on various aspects.
Assess Your Current Lifestyle Cost
First estimate how much money you need for maintaining your current lifestyle. Now, determine the number of years in hand for your retirement. You can approximately determine how much money would be required to maintain your current lifestyle after you retire and applying inflation on your current expenses for number of years left in your retirement. This would give you an approximate figure. You can further add expenses related to various other lifestyle enhancements that you expect after your retirement.
Make A List of Post Retirement Expenses
While estimating the post requirement expenses, you must determine your expected regular expenses at that time. If you are family of four members including your spouse and children, you must include all expenses related to them especially if they are expected to be financially dependent on you. Include all expenses such as rent, electricity bill, food, travelling, property maintenance, etc. You must apply expected rate of inflation while estimating the money requirement towards regular expenses after the retirement.
Adhil Shetty, CEO, Bankbazaar.com, says, “Determine how much you need to save and how you will invest your money to reach your retirement goals. Consider factors such as your risk tolerance, time horizon, and other financial goals. Start saving and investing according to your plan, regularly monitor your progress, and make adjustments as necessary. Estimate the amount of money you will need each year during retirement, considering inflation and other factors.”
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Consider Insurance Premium Cost
Health and life insurance become more important after you retire. The life insurance premium usually remains the same throughout the tenure, but the health insurance premium increases with one’s age. You must stay adequately insured against life and health risks. Health insurance of your dependent family members would also be needed. So, add money required towards life and health insurance while determining the money requirement after the retirement.
Evaluate Post-Retirement Financial Goals
You may achieve many of your financial goals till you get retired, however, you may still be left with several financial goals that you would be achieving after the retirement. List out all such goals. For example, goals can be related to holiday, foreign tour, buying a home, education or marriage of children, etc.
Determine the Size of Contingency Fund
The size of contingency fund that you currently maintain may not remain adequate after you retire because of inflation. Considering the family size of four members, you should estimate the size of contingency fund that would be required after your retirement. The contingency fund would help you meet emergency expenses such as related to urgent hospitalization, sudden traveling, etc.
After you add the assessed money requirement towards lifestyle, financial goals, insurance and contingency fund, you’ll be able to figure out an approximate size of fund required to meet your retirement needs. Don’t forget to apply expected inflation rate when estimating the expenses after retirement based on the current level of expenses. The required money post retirement may depend on several other factors, so you must consult your financial planner for designing the plan as per your requirements.
Hope these tips will help you make a better retirement plan for your family. Initially, it may look a little challenging task, but once you get on to it, it will be easier to achieve your goals.