We cannot be working full time forever. At some point, during retirement age, normally 65, we go on to take different needs and priorities in life – travels, maintenance medicine, a farm to till, etc.
Some people work hard and save money. Yet they spend so much that they end up getting back the savings supposedly planed for retirement. A present lifestyle, when continued in the future, will need tremendous amount of money, time, discipline for years to build what is to be a future need. There is a formula to build the need for the future and this is discussed below:
Computing for Retirement Needs
A. The average monthly expense for (travels, maintenance, medicine, etc.)
B. Future Yearly need = A x 12
C. After retirement, for how long the expense is going to be needed
D. The provisions (savings, investments) already made
E. Retirement Need: (BxC) – D
An example will be for a 32 year old guy who plans to have a 30,000 monthly expense in the future. The computation will be as follows:
C. 10 years after age 65
D. 500,000 (savings in bank, bonds)
E. Retirement Need: (BxC) – D = 3, 600, 000 – 500, 000 = 3,100,000
So to enjoy a retirement life with 30,000 monthly cash to spend, the retirement plan calls for the building of a fund that will give 3.1M by age 65 will may be consumed within 10 years.
So for a guy aged 32, investing in a 15-year plan at 5,000 per month or 60,000 a year, here’s the potential retirement benefit:
Sum Assured: 360K
Total and Permanent Disability; 200K
Accidental Death and Disablement: 165K
low, because the intent is for Investment. Here’s the fund value at different ages:
@age 45: 1.246M
@age 50: 2.194M
@age 60: 5.616M
@age 65: 8.989M
Fund is 100% Equity Fund that may potentially return 10% per annum. Note that this is not guaranteed as Equity Fund performance may vary year on year.
What’s good about this plan is tha payment is only made for 15 consecutive years with the last 5 years earning a 10% of annual premium as loyalty bonus. Pru Life UK company is generous to add 6K to the fund value from year 11 to 15 provided no withdrawals nor payments get lapses from year 1 to 10. While you only pay for 15 years, you will continue to have insurance coverage until age 100 provided there is enough amount left in your Fund Value. maintaining 500K should be enough to help continue your policy until age 100. You can also add investment thru TopUps. TopUps can significantly add returns to your investment. Minimum TopUp amount is 20K.
If you wish to identify your retirement need shortfall and/or retirement plan options, send me a message and let’s discuss them.