How much money does a couple needs to retire comfortably?

 

Retirement is a dreaded thought for many, especially for private sector employees in India. No salaries to be credited, no pensions to earn, one therefore needs to arrange for a sufficient fund or source regular income to sail through the rest of the life. It’s indeed a relatively easier bet when both a couple are working and strategically accumulating the corpus. But the question that prevails is, how much money do they need to retire comfortably and what is the best retirement plan in India? 

What Is a Good Monthly Retirement Income for a Couple?

There’s no set formula to arrive at a specific figure that can be called a good monthly retirement income for a couple because that would depend on their perspectives, goals, priorities and lifestyle. However, research has pointed out that usually, people tend to spend 80% of their pre-retirement income after they retire. Depending on whether you prefer your retirement lifestyle to be less expensive or more, this percentage can vary between 70-90%. If you have clear figures in mind, a retirement planning calculator can come to aid here. Based on the estimated corpus, it can generate the monthly income options you can look at and the savings schedule you need to follow to reach that target.   

Factors to consider in retirement planning as a couple

Once a couple starts to check for the best retirement plan in India to go for, certain factors need to be focused on. 

Retirement timelines:

There’s no mandate or certainty that both partners will retire at the same time. Differences in age or nature of work can always lead to different time frames. The retirement plan thus needs to be strategized accordingly. 

Individual perspectives and priorities:

It’s crucial to know how you and your partner view money and what you want to do with it. This saves you from unnecessary conflicts and leads to better money management. 

Individual Risk Tolerance:

One person in the couple might be risk-averse and wants the capital to be protected while the other can be keen to invest in high-risk gain plans. The investment path and portfolio as a couple should be etched accordingly. 

Tax and debt situations:

Couples need to keep in mind their individual liabilities and income tax requirements. This has to be incorporated into the retirement plan for a smooth financial journey. 

Inflation rate:

Whatever you plan, wherever you invest, remember to consider the inflation rates. This can save you from unwanted financial struggles. 

What is the 4% rule?

The 4% rule of savings suggests that a couple should limit their spending and extract only 4% from the retirement corpus every year. This in turn will ensure stability and hassle-free life without having to worry about lack of funds. 

How much savings will you need to retire?

Technically, the amount of savings a couple needs to retire should depend on their lifestyle and goals. However, going by regular patterns, experts recommend the following thumb rules. 

• The retirement corpus should be 7-8 times the combined annual income or 30X of the annual spending
• Another formula says, an ideal savings for retirement = (annual expenses after retirement X number of years left in retirement) / (1 + inflation rate)^(number of years left in retirement)

Bottom line

Formulae can only give you a benchmark which can guide you if you are on track with savings for a comfortable retirement. The key here is to understand each other’s preferences, and future needs and trace the best retirement plan in India that is suited to both of you. 

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• Here is how to make most of your money after retirement
• How HDFC Life Retirement Plans Help You Save on Taxes?
• One Crore Term Insurance for Young Professionals: Securing Your Future
• Planning for Financial Security – How Much Should I Save for Retirement?

ARN - ED/10/23/5672