You may not be able to control the factors that may impact your retirement goals, but you can adjust your savings in sync with the moving goalposts. So, you need lots of financial discipline and consistency to stay on track for achieving your retirement goals. Here’re some aspects that can help you know how much to save for retirement when the goalpost keeps moving.
Keep An Eye On The Inflation Rate
Inflation consistently depletes the value of your money. So, by keeping a strict tab on the prevailing inflation rate, you can estimate the size of the corpus required at the time of your retirement to get the desired lifestyle. For example, suppose you need Rs 5 lakh per annum to meet your current lifestyle requirement when the prevailing inflation rate is 5 per cent. Assuming you have 20 years in hand to your retirement, after 20 years, you would require around Rs 13.6 lakh per annum to meet the current level of lifestyle.
You can invest towards your retirement goal while keeping the prevailing inflation rate in mind. You should try to generate a higher real rate of return on your investment to accumulate an adequate corpus at the time of your retirement.
Set Your Goal To Clear All Your Debts Before The Retirement Starts
It’s not a good idea to enter your retirement along with pending debt obligations. So, while determining your saving goal for your retirement, you should prefer retiring after repaying your entire debt. If you have to enter the retirement period along with debt obligations, then you must increase the size of your retirement corpus adequately so that you can repay the equated monthly instalments (EMIs) easily. You can increase the corpus requirement for your retirement to the extent of repayment of the remaining debt obligation and save money towards your retirement accordingly.
Set A Realistic Financial Goal
Everyone wants to get a lavish and comfortable retirement life. However, it is always better to set as realistic a retirement goal as possible. You can consider your prevailing discretionary income and expected growth in discretionary income during your working life to ascertain how much you should save to get the desired retirement lifestyle. As a thumb rule, you should build a corpus of around 10 to 12 times your last drawn annual income before retiring from work life.
Reviewing your retirement goal from time to time and in sync with changes in the inflation rate, your income, and your lifestyle expenses can help you determine the saving requirement for your retirement. Having adequate contingency funds and insurance coverage can help you save consistently towards your retirement goal.
The author is an Independent Financial Journalist.