Determining retirement savings goals involves considering several factors to ensure a comfortable retirement. Here are some key considerations for calculating the amount needed:
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Desired Lifestyle
Think about the kind of lifestyle you want to have during retirement. Consider factors like where you want to live, your hobbies, travel plans, and any specific goals or dreams you have. This will help you estimate the expenses you'll need to cover to maintain your desired lifestyle.
Current Expenses
Assess your current expenses and evaluate which expenses may change during retirement. For example, you will no longer have expenses like commuting to office or professional clothing. However, healthcare and leisure activities may increase.
Inflation
Inflation refers to the rising cost of goods and services over time. Consider the effect of inflation on retirement savings. Estimate the average rate of inflation and factor it into your calculations.
Healthcare Costs
Healthcare expenses tend to rise with age. Consider the potential costs associated with medical treatments, medications, and health insurance premiums.
Life Expectancy
While it's challenging to predict precise life expectancy, consider your family history, health, and lifestyle choices. It’ll give you a rough idea.
There are various government-provided retirement benefits like the National Pension Scheme (NPS) and the Employees' Provident Fund (EPF). Take into account the expected income from these benefits as it may influence the amount you need to save.
Investment Returns
Consider the potential returns on your investments. While it's not guaranteed, historical data and expert advice can help estimate an average rate of return for your investments.
Once you have considered these factors, you can use retirement calculators for further refinement or consult a financial advisor to estimate the amount you need to save for a comfortable retirement. They will help you determine the required savings rate, taking into account your current age, expected retirement age, and other relevant factors.
