A Simple & Realistic Approach Towards Retirement Corpus
The requirements for retirement corpus can be different from person to person. Depending on lifestyle, household expenditure, income, and current inflation rate, approaches towards retirement corpus can be varying. Retirement corpus refers to a sensible retirement plan. Essentially, employees make a reliable retirement plan well before retirement. This includes: How does their lifestyle look like after retirement? How many savings are enough for their post-retirement lives? Similarly, for how long will retirement savings work for them?
Since a reliable and well-thought retirement plan is crucial for a dignified post-retirement life, it is inevitable to design a well-pondered retirement plan. So, corpus retirement includes the complex calculations of your current income, savings, current inflation rate, and the time span your savings will work for.
For example, if you have savings of X amount, and you are looking to make them work for you for 30 years, you will have to be mindful of two fundamental factors: The current inflation rate and your daily expenses. So, a realistic approach would be multiplying your expenses with the current inflation rate and dividing by the Return on Investment (ROI).
One-Off Cuts Are Not A Part of Corpus Retirement
The calculation of corpus retirement is based on day-to-day expenses. Meaning, it includes the expenses that you spend money on - every single day. Think about electricity bills, mortgages, cable bills, and groceries. These are the fundamental expenditures that you are likely to spend money on - if not, for the sake of survival.
However, the corpus retirement calculation does not include ‘additional’ expenditures that do not happen every single day. Things like marriage, childcare, education, and travel expenses are not a part of a realistic corpus retirement. Since these ‘additional expenses’ occur once in a blue moon, you are not supposed to include them in your corpus retirement calculation.
A “Fill it, Shut it, and Forget it” Approach Is Not A Realistic One
As mentioned earlier, corpus retirement is a matter of complex calculations of one’s lifestyle, savings, inflation rate, and Return on Investment (ROI.) So, the key to the success of your corpus retirement is a keen analysis. A blindfolded approach will not get you anywhere.
You can think to yourself: “Well, I have this X amount of savings in place and the current inflation rate Y. For how long will these savings will beat the current inflation rate?” If you have this approach in mind, your corpus retirement plan is very likely to sustain for a long time period. Nonetheless, it is pertinent to mention here that the inflation rate does not remain constant. Rather, it goes through a series of fluctuations. Given this uncertainty of the inflation rate, you should have an adaptable and flexible approach towards your corpus retirement.