{"id":4772,"date":"2014-08-14T00:02:15","date_gmt":"2014-08-13T16:02:15","guid":{"rendered":"http:\/\/www.imoney.my\/articles\/?p=4772"},"modified":"2014-08-15T10:22:38","modified_gmt":"2014-08-15T02:22:38","slug":"retirement-planning","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/retirement-planning","title":{"rendered":"Retirement Planning: Calculate How Much You Need in 5 Simple Steps"},"content":{"rendered":"

\"Calculating<\/p>\n

No one can work forever \u2013 which makes retirement planning an important subject whether you\u2019re employed or running your own business.<\/p>\n

But before you can start working towards achieving your retirement goals, you\u2019ll need to determine the amount you actually need. To do so, you\u2019ll have to do some basic calculations based on your current expenditure whilst factoring in inflation from now until the time you retire.<\/p>\n

In this article, we\u2019ll show you the 5 vital steps that\u2019ll help you calculate how much you need for your retirement:<\/p>\n

<\/span>Step 1: Annual expenditure<\/strong><\/span><\/h2>\n

Let\u2019s start off by looking at your annual expenditure now. Generally, financial experts use 80% of what your current expenditure is as a ballpark figure indicating the amount you\u2019ll need when you retire.<\/p>\n

So if your annual expenditure is RM100,000 now, it is assumed that you\u2019ll need RM80,000 when you retire. Similarly, if your present expenditure is RM50,000, you\u2019ll need RM40,000.<\/p>\n

<\/span>Step 2: Retirement age<\/strong><\/span><\/h2>\n

Now, you\u2019ll need to ascertain the number of years you have before you hit retirement age. Assuming that you plan to retire at 55, simply subtract your current age by 55 and you\u2019ll get this number. So if you are 45, the number of years you have before retirement is 55 \u2013 45 = 10.<\/p>\n

<\/span>Step 3: Factor in inflation<\/strong><\/span><\/h2>\n

In this step, we\u2019ll have to factor in inflation. This is vital because in the world today, prices are increasing every single year. A plate of Nasi Lemak that costs RM3 today, could be RM4 or more in a few years\u2019 time! You\u2019ll need to reflect that in your planning to avoid a drastic drop in living standard when you do retire.<\/p>\n

Generally, an inflation of 3%<\/strong> is a relatively safe figure to use when it comes to retirement planning.<\/p>\n

<\/span>Step 4: The formula<\/strong><\/span><\/h2>\n

Now that you have all the above, you are ready to calculate the amount you need every year after you retire. If you\u2019re relatively fluent with advanced math calculation, you could use the formula M = P (1 + I)n<\/sup>\u00a0to work this out.<\/p>\n