How much do I need to retire?

This is a frequently asked question. One would need to know the number before one can plan effectively on his / her retirement plan. There are 2 ways to calculation the figure:-

1. Based on capital preservation method: based on this method, a huge sum of money (capital) will be used to generate income for post retirement expenses. The capital will be preserved and left over for the next generation.
2. Based on capital liquidation method: based on this method, the retirement fund will be used to pay up the post retirement expenses. No money will be left over for the next generation.

Calculation:-

1. Capital preservation method:

Key assumptions:

1. Post retirement expenses is RM 100,000 yearly
   1. Post retirement investment return is 6%
   1. Post retirement inflation rate is 3%
   1. Real return              = (investment return – inflation rate) ÷ (1 + Inflation Rate)

= (6% – 3%) ÷ 1.03 = 2.91%

Capital required for retirement

       = Yearly post retirement expenses ÷ Real Return

       = RM 100,000 ÷ 2.91%

       = RM 3,436,426

• Capital liquidation method: There are more data to be keyed in, click here to find the Private Pension Administrator calculator.

************************************************************************

You can receive constant broadcast message relating to wealth creation to financial freedom through Telegram. Click here to subscribe to the telegram for the weekly newsletter.