I won’t simply say “It depends”. But i will give you an outline. There are some quick general rules of thumb and guidelines that can help you start to plan.
One popular rule is the 4% Safe Withdrawal Rate (SWR) rule. This rule suggests that you should save enough so that you can withdraw 4% of your retirement portfolio every year to cover your living expenses. For example in USA, if you need $40,000 a year to live on, you should aim to save $1 million for retirement ($40,000 is 4% of $1 million). In India, if you need Rs 10,00,000 per year then aim to saveRs 2.5 crores.
But bear in mind, this rule assumes that you have a well-balanced portfolio and doesn’t take into account the potential for major market downturns or unexpected expenses. It also assumes a retirement period of about 30 years, so if you retire early or live longer, you might need more.
Also, lifestyle is a key factor in determining how much money you will need. If you plan on traveling frequently, pursuing expensive hobbies, or if you have significant health care costs, you will need to save more. On the other hand, if you plan on maintaining a relatively modest lifestyle, you may need less.
Location is another critical consideration. The cost of living can vary dramatically from place to place. For example, retiring in a metropolitan city will be much more expensive compared to a small town.
Lastly, the number of dependents you have and your financial commitments will also impact your retirement savings. If you are supporting children or aging parents, or if you have significant debts, you will need more money to retire comfortably.
Given all these variables, it’s no surprise that retirement planning is often considered more of an art than a science. It’s highly recommended to consult with a SEBI Registered investment advisor who can understand your unique situation and help you plan accordingly. So, start planning early, save consistently, and invest wisely to ensure a comfortable retirement.
