Pension Calculator

Pension Calculator, the online tool that calculates the amount needed for a person to live comfortably in his old age when he has stopped earning a steady income. It helps in calculating the money that should be extracted from the current income to save towards the Pension Fund to meet his monetary needs in his golden period.

Pension Calculator takes age, income, savings, rate of inflation, and many other factors into consideration to come at a value that would be conveniently enough for him.

Pension Calculator is a vital tool that helps in assessing the needs, criteria, current situation, and pension fund for retirement.

Information Required to Calculate Pension using Pension Calculator

The following details are required to calculate a tentative amount of Pension using Basic Pension Calculator to help the individual lead a convenient and secure retirement:

  • The date of birth of the applicant is mandatory for record-keeping objectives, and the ID submitted should be in accordance with a Government ID proof.
  • Age of Retirement is a vital question that needs to be answered. For Government employees, the age remains static at 60 years. But for self-employed and salaried at private companies, this field can be modified as the age could be less or more than 60 depending on the choice of the individual.
  • Annual Income, which should be ‘net’ not ‘gross’, is considered while calculating the Pension amount as the net income may include some fringe benefits given by the employer.
  • Savings of any other kind which could be through other investments like Insurance, equity and shares, real estate investments, fixed deposits etc. should be considered while calculating the Pension amount.
  • Type of Accommodation - The retired may stay in after retirement is an important consideration as it is relevant to gauge if the property will be self-owned, on rent or the individual will be paying EMIs on the place. This will help in calculating the exact amount that he may require to fulfil basic needs like accommodation.

How to use Pension Calculator?

To use the Pension Plan Calculator, certain information needs to be filled in the online form like:

  • Date of Birth to calculate the number of years required for savings till the time he reaches his retirement age.
  • Amount of investment, which refers to monthly contributions that the individual can make according to his income and expenses
  • Expected ROI - Return on Investment which the individual desires to achieve.
  • The Annuity percentage - Annuity is the monthly amount that the applicant will receive as his retirement fund. When a percentage of the funds is reinvested to buy an annuity or another pension fund, this factor is considered. The percentage of accumulated funds should not be less than 40%, and in case of premature exit of pension schemes, before the applicant turns 60, the minimum percentage will be 80%.
  • Expected rate of an annuity - finally, the applicant would need to enter the expected amount of annuity from his pension fund.

Once all the details are entered, the Basic Pension Calculator will calculate the most crucial factors of retirement like:

  • The estimated lump-sum amount that the individual may receive at the time of retirement or maturity
  • Summary of the pension amount
  • The total amount contributed during the accumulation phase
  • Amount generated on maturity or expected monthly pension
  • Amount of total interest earned during the entire time period of the Pension contribution

Example:

For example, Mr X is 36 years of age and expects to retire at the age of 60. He wants to invest Rs. 10000 each month towards the Pension amount. The expected rate of the annuity is calculated at 8%

The Pension Plan Calculator will calculate the following for him as his Pension Fund:

Number of years invested in contribution towards Pension

24

The invested amount

Rs. 2880000 (a)

Interest earned

Rs. 5773258.43 (b)

Total invested amount

Rs. 8653258.43 (a + b)

Annual Pension Amount

Rs. 415356.40

Monthly Pension

Rs. 34613.03

The amount that can be withdrawn on maturity

Rs. 3461303.37

Salient Features of a Pension Calculator

The important features of the service of basic pension calculator are:

  • The application is available online and is simple, easy, user-friendly, and convenient to use.
  • Pension Plan Calculator is a significant tool to calculate the exact Pension Saving Fund that may be needed by a retired person.
  • Pension calculators help in calculating various important things like:
    • Total amount invested by the working individual during the initial or the accumulation stage
    • The rate of interest and the total amount of interest he can earn on the fund
    • The total amount of Pension that he will receive at the time of retirement
  • Pension Plan Calculator is available to anyone and everyone who wants to invest in the National Pension Scheme or who wants to estimate the pension fund which may be required by him at the time of retirement based on his age, income, responsibilities, savings, and lifestyle.

Core Benefits of using a Pension Calculator

A Pension Calculator has numerous benefits like:

  • It is a time-saving tool, which eliminates the hassle of manually calculating the amount required for retirement and is technologically enhanced in making the right calculations.
  • To achieve the desired amount of pension and savings when there is no source of income helps in deriving the appropriate amount of investment and savings that need to be done by the applicant while he is earning money. The calculator also takes other savings plans into consideration and the income bifurcation of the individual, thus, making the financial planning more effective and long term.
  • The most important information that the Pension Calculator reveals is the estimated amount of Pension that the individual will receive when he retires.

Importance of Planning and Calculating the Pension using a Pension Calculator

Many of us procrastinate on the idea of Retirement and later regret the imperative decision. Still, it is highly recommended to start working on one's retirement from a very early age and be prepared to face the crucial time period and enjoy every moment of it.

Pension Calculation is important because of factors like:

Increase in Life Expectancy

With the advent of the latest technologies and medical equipment to cure fatal diseases and illnesses, life expectancy has increased considerably, and people must be financially prepared to live a long healthy life keeping spare funds for emergencies.

Contribute towards Family Goals

Instead of being financially dependent on children, a retired person should be apt and secure enough to raise his family further or be financially independent to look after grand-children or keep funds for purposes like higher education, weddings, gifs or just a token of remembrance to children or grandchildren. If the age of retirement is in a smooth transition, it attracts respect, love, and understanding, and there is nothing to worry or stress about.

Social Security

Being financially independent at a crucial age when the individual is completely out of work with no steady income is necessary as he would need enough finances to manage his lifestyle and secure his social life. Without a constant financial backup, a person may feel handicapped and may have to cut down on his social life, but with the security of a good pension fund, he may be free to live a lavish and luxurious lifestyle.

Practicality

In the 21st century, people have become more practical and are quite busy with their own personal life to the extent that they do not have time to happily look after their old parents. People have become more practical and are quite busy with their own personal life. With the rise of inflation, everyone wants to cater to their immediate families and their financial needs rather than paying attention to the expenses of their old parents. So, one has to manage pension funds and save for rainy days instead of relying on their young children.

Insufficient Employer Fund for Pension

There are cases especially in the case of Government and private jobs, wherein the employer also keeps a share for the employee retirement fund. Still, most of the times, this is not enough. This may not be apt to resume the lifestyle and expenditure of the retired individual so he must calculate a pension calculator fund to save the required funds.

To do What makes Them Happy

When the employee or working life of a person is over, and he retires, there are many cases when the retired wants to finally pursue his dreams and indulge him in the passion and creativity that he always wanted to follow. Still, he never got the time to do so. So, a good pension fund using the Pension Calculator India can help him fulfil his dreams and follow his passion.

Pension Calculator - FAQs

  • Q1. Who can use the Pension Calculator?

    Ans. Any person who is eligible to invest in the National Pension Scheme, between the age group of 18 to 60 years and who have submitted their KYC documents while investing for Pension can use the Pension Calculator to make necessary calculations.

  • Q2. Is investing in Pension Plans risk-free? And what are the tax benefits that are applicable under the Plan?

    Ans. Pension schemes sponsored by the Government are risk-free and have the benefit of tax exemptions up to a limit of Rs. 1.50 Lakh under section 80C of the Indian Income Tax act. Contributions made by both the employee and the employer are eligible for tax deductions.

  • Q3. What is the Formula for using Pension Calculator?

    Ans. The Pension Calculator India uses the method of compounding interest to estimate the returns. The formula used is:

    • A = P (1 r/n) ^ not where
    • A = Amount depicting the returns on Pension schemes
    • P = Principal Sum
    • R = Interest p.a.
    • N or n = Compounding of Interest indicating the Number of times it has been done.
    • T or t = Total tenure of the plan
  • Q4. What are the factors that affect the Calculation of Pension Plan Premium?

    Ans. Different factors that affect Pension Calculator are as follows:

    • The age of retirement is usually 60 but can be customised based on the number of extended years the individual plans to work.
    • Rate of Inflation as it is important to gauge the value of money when the person retires which may be much higher than the present value.
    • The expectancy of life in India is normally between 70-80 years but can be increased or decreased based on the working conditions, financial stability and medical health of the applicant.
    • Rate of ROI - Return on Investment while still on the job from investments that the individual may have done while he was still working like real estate, equity, stocks and shares, etc.
    • Post-retirement Expenses, which will in accordance with the pending responsibilities of the individual which may have not yet been fulfilled and his current lifestyle.
  • Q5. Which Investment instruments offer annuity schemes of the Pension Plans?

    Ans. Various Investment instruments exist in the market which offers beneficial Pension Plans like:

    National Pension Scheme

Written By: Paisawiki - Updated: 12 April 2021
Pension Plans
Disclaimer: Paisawiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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