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How Many Years Of Retirement Should I Plan For?

Running out of money after retirement can be scary because it can lead to financial distress, which is difficult to overcome. So, it's important to plan and figure out how many years of retirement would be sufficient for you.

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Amit Sethi
December 8, 2023
Rajasthan Pension Scheme

Rajasthan Pension Scheme

Knowing how many years of retirement you must plan for can be tricky because you can’t predict how long you will live. So, how to do it? Well, here are some essential steps that can help you ascertain the retirement period and make an effective plan for it.

How Long You May Live? Make The Estimation

It can be difficult to assess how long you may live as such an assessment may not be accurate many times. However, estimating your expected remaining life can still give you a rough idea about the fund size you may need after you retire. If you don’t live as estimated, you’ll leave a legacy for the next generation. If you live more than you have estimated, you can adjust your lifestyle and expenses to meet your financial needs. So, based on your health condition, lifestyle, medical facility around you, and other factors, you can estimate the number of years you may live. You may add an extra 5 to 10 years to your estimated remaining life for greater financial cushion.

Assess Your Financial Needs 

After retirement, your financial needs may change significantly in comparison to your work life. Also, your financial needs may continue to change as you grow older due to changes in your needs and lifestyle requirements. So, you should try to assess your various financial needs at different stages in your life after retirement. It will help you identify your various financial goals during your retirement period and the fund requirements to meet them.

Keep A Strict Tab On The Prevailing Inflation Rate

Inflation can be a big spoiler when you plan for your retirement. You may run out of money if the inflation remains higher than you had expected during your retirement. You need to consistently beat the prevailing inflation rate by investing your retirement corpus in instruments that can offer a higher real rate of return. You should keep your money invested and try to earn a higher return than the prevailing inflation rate.

Finally

You should try to plan for retirement for as many years as possible. An extra corpus can help you with extra financial cushion and greater risk appetite. As you grow older, your dependency on the retirement corpus may increase, so try to make a perpetual retirement plan that can support your financial needs as long as you live!

The author is an independent financial journalist.

 

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