We earn and spend; Rinse - Repeat! We really do not know how much it costs to earn and live, leave alone the needs for pursuing a passion! As the income increases, the expenses catch up - unless planned. Parkinson's law states "Work expands to fill the time available". Similarly, the expenses increase to consume the income! Planning is essential; setting aside an amount for future consumption is necessary. People starting at age 25 and planning to retire at 55 have 30 years of work life and if they expect to live till 95 years, 40 years of retirement life. Assume there is no income in retirement, the 30 years of work life has to provide for 40 years of retirement!
It takes some math and compounding to estimate how much it is going to cost for expenses, when we retire. To start with, one has to know what is the expense at the current level and how many years he has in his hands to retire and what is the contribution towards the retirement corpus that is going to be committed every year.
To help with such projections, I have created a simple application to help with the calculation. This I call the "Calculator Suite for Retirement". Consists of 3 parts:
1. Retirement Calculator: Projects the expenses and corpus and lets us know whether the current networth and the investment commitment till the retirment age will be able to provide for the entire life.
2. Annuity Calculator: Given a corpus and expected years for which the corpus is planned for, how much is the maximum annuity that can be withdrawn every year, assuming a given inflation
3. Corpus Calculator: Given a required annuity for a defined number of years at a set inflation level, how much is the corpus required?
Though I call it as a retirement calculator, this can be used for any defined goal - be it children's higher education, planning for a vacation, setting aside and building corpus for pursuing a passion, upgrading a house or a car - any such medium to long term goals.
It takes some math and compounding to estimate how much it is going to cost for expenses, when we retire. To start with, one has to know what is the expense at the current level and how many years he has in his hands to retire and what is the contribution towards the retirement corpus that is going to be committed every year.
To help with such projections, I have created a simple application to help with the calculation. This I call the "Calculator Suite for Retirement". Consists of 3 parts:
1. Retirement Calculator: Projects the expenses and corpus and lets us know whether the current networth and the investment commitment till the retirment age will be able to provide for the entire life.
2. Annuity Calculator: Given a corpus and expected years for which the corpus is planned for, how much is the maximum annuity that can be withdrawn every year, assuming a given inflation
3. Corpus Calculator: Given a required annuity for a defined number of years at a set inflation level, how much is the corpus required?
Though I call it as a retirement calculator, this can be used for any defined goal - be it children's higher education, planning for a vacation, setting aside and building corpus for pursuing a passion, upgrading a house or a car - any such medium to long term goals.
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