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Top 5 tips to calculate post retirement expenses and opt for the best annuity plan

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Life Insurance article in Advisorkhoj - Top 5 tips to calculate post retirement expenses and opt for the best annuity plan
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A large majority of us feel retirement is for old age and that we need not be bothered by it. Well, it is partially true. Surely it is for old age, but if you do not take the right steps now, you might put your future in some danger. When it comes to future, there are two aspects of it, the known and the unknown.

An insurance can help you out with both. While something like a term plan will take care of the unknown, any annuity policy will aid you during the known or your retirement phase. But even before that, it is critical to understand and have a rough estimate as to how much money will be enough for your retirement. Here are some 5 tips for you to calculate your post-retirement expenses and how to stay ahead with a best annuity plan.

Current Expenses

The first piece of solving the puzzle called retirement starts with understanding your current expenses. Jot down all your expenses starting from rent to school fees of your children. It must include all expenses that you undergo on a regular basis such as household expenses or money spent on health related stuff. You then need to expedite the same over a year. Now you must add vacation costs or other costs such as maintenance or servicing.

Factor in Inflation

A liter of milk or other grocery stuff was much cheaper a decade back. Then they met with inflation and their prices are where they are currently. While deciding how much you need in future, do not forget to factor in the annual inflation. You could take historical data and anticipate similar inflation rate for future or rely on your understanding of economics.

Future Proof

To ensure you have enough money to be future proof, you need to consider your current yearly expenses. You can then add in inflation for the number of years left for your retirement. It, of course, depends on you how you want to lead your post-retirement life. You could either step up your living standards or stick to the current ones. Let’s assume a consumable is Rs. 1,000 this year, an inflation rate of 6% over two years would raise the price to Rs. 1,123.

Corpus needed at Retirement

From the above, you would have arrived at an amount that you would need post-retirement. An annuity policy would be your best bet to receive regular income. The plan usually requires you to pay continuous premiums until a specific number of years. Depending on the plan that you choose, the best annuity plan could either last till a certain age (like 75 or 80 years) or till your death.

Savings per Month

This is the last and most crucial step of it all. You are now aware of how much you would need and that a best annuity plan would help you achieve that. But what should be your investment at the current time so that you have a secure retirement? You could get your calculator and do the calculations yourself. Once you know your monthly savings, you can multiply it by the average returns of your investment instrument. There are a lot of online retirement calculators which will help you decide this aspect.

You can use the above to give your retirement planning an outline and build on the top of it. A financial advisor would do the same and can give more details. If you are someone who likes to closely monitor their finances, you should take the above approach and choose the annuity policy best suited for your retirement years.

Insurance is the subject matter of the solicitation.

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Priyanka Chakrabarty

A literature enthusiast who loves to write. An ardent social worker who dreams of bringing about change and hopes to do so through her writing. A firm believer of the saying pen is mightier than the sword, Priyanka is an English Honours graduate. She also pursed Diploma in Wealth Management Practice from IIFP and is a certified social media expert.

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