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Pension Plan Calculator – How to Use It, Benefits and More

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Building up a substantial corpus that not only supports your lifestyle but also beats the rate of investment is ideal to ensure financial stability following your retirement in the UAE or anywhere else in the world. You need to determine the corpus you will need for retiring comfortably in advance and plan accordingly to achieve it. This is where a pension plan calculator can come in handy. This easy-to-use online tool calculates the amount you will need in order to have a post-retirement life devoid of financial woes.

A pension plan calculator calculates the amount you need to save to create a suitable retirement corpus. It considers several factors, such as income, monthly expenses and retirement age for this calculation. This handy tool can be used to plan your finances in advance and meet your financial target. We will use this write-up to understand what a pension plan calculator is, how you can use and what benefits can you reap with it. Let’s get started.

What is a pension plan calculator?

A retirement planning calculator provides an approximate amount you need to save each month to create the retirement corpus of your choice. Most online pension plan calculators typically require the users to provide information related to the following fields:

  • Personal details: This includes your date of birth, expected retirement age and your accommodation when you retire.
  • Income details: In this field, you need to enter details pertaining to your salary.
  • Savings details: In this field, you need to enter the amount you contribute towards savings every year.

Depending on these details, the pension plan calculator determines a corpus that is ideal for you to lead a hassle-free post-retirement life and the monthly/yearly savings you need to do to achieve it.

How to use a pension plan calculator?

One of the many benefits of a pension plan calculator is that it is easy to use. You simply need to follow the below-given steps to use a pension plan calculator:

  • Step 1: Open a pension plan calculator by visiting your preferred website.
  • Step 2: Enter your date of birth, retirement age, post-retirement accommodation, savings and annual income.
  • Step 3: Click calculate to find the year by which you will retire. In addition, the calculator will also provide details related to your income over the years with an assumed growth of 5%. Likewise, the growth of your savings is also assumed at 5%. However, you can edit these details as per your preference.
  • Step 4: Based on the data mentioned above, the pension plan calculator will provide you with the corpus you must create to lead a comfortable post-retirement life.

What are the factors considered by a pension plan calculator?

An online pension plan calculator considers the following factors while calculating estimated retirement savings:

  • Date of Birth - The date of birth is the starting point and helps to get an estimation of your current age.
  • Retirement Age - While the official retirement age in UAE is 60 years, the calculators allow you to select the age of retirement manually as well.  This feature is helpful for self-employed people.
  • Annual Income - Income is yet another important factor considered by pension plan calculators. When you enter the annual income, consider putting your net income instead of gross income. Gross income is generally subject to several deductions. Hence, enter the net income for an accurate and transparent calculation.
  • Savings - This field requires you to enter the amount you generally contribute towards savings. This not only includes the balance of the savings account but also savings and earnings from other sources like investments, FDs, etc. While it is not possible to accurately calculate the returns on investment, you can choose to simply add the amount you have put down in fixed deposits so far.
  • Post Retirement Accommodation - In this field, you will have to enter the nature of accommodation you will seek after retirement. In simple terms, mention whether you will live on your own property or a rented house and the country in which you will retire. Several professionals working in the UAE decide to retire in their home country. It is essential to choose this field so that you have an accurate idea of the retirement corpus you need as per the conversion rate of your retirement country’s currency.
  • Growth Rate - The growth rate is the rate by which you think your income and savings will grow. You can put an estimated or expected figure if you are not sure of the exact figure.

What are the benefits of a pension plan calculator?

This convenient and handy online tool offers various benefits, such as:

1. Helps Plan Finances

The most crucial benefit of using a pension plan calculator is that it gives you an estimate of the monthly/yearly amount you need to save to create your retirement corpus. In short, it lets you know whether your current savings plan is falling short and suggests corrective measures to reach your financial goals.

2. Free and Simple to Use

Using a retirement calculator is not only easy but also free. It immediately shows results once you've entered the necessary information. You can simply choose any free calculator available online and get the required information in a matter of minutes.

Final Verdict

A pension plan calculator is an indispensable tool that helps you with proper retirement planning It helps you in determining the savings required to achieve your target retirement corpus. These calculators help you start planning early so that you can enjoy a leisurely post-retirement life. The only thing you must keep in mind is that the amount reflected by a pension plan calculator is only an estimate as per the information entered. The real corpus may differ as per the factors that influence them. So, make sure that you enter a fairly correct estimate of all the information required. Once you have your retirement corpus, you can find a suitable retirement plan with us and start saving.

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