Four matters relating to retirement planning that I have to say to you, namely
(1) Identify the purpose in the old days,
(2) Choice of quality lifestyle in the old days,
(3) Measure the level of current income,
(4) Noting rate inflation.

As I promised, this edition focuses on the discussion of the estimated financial resources in old age as well as tips for identifying the funding shortage of funds with various funding sources available. Although it seems simple, there are systematic steps you should take to ensure a happy old age.

Prepare the Source of Funds

To facilitate your understanding about the methodology of calculation of income in old age, I will present illustrations Sasongko Pak family (quoted from the Old Days Planning Module Book Courses Certified Financial Planner).

Mr. Sasongko (in her 30s) has two teenage children. Husband and wife in this family is quite successful in their respective careers and they run a simple lifestyle. Both their income approximately Rp10 million per month before taxes.

They agreed to stop working at age 60 years (30 years). They want to have living standards that are simple, comfortable, but there is a certainty to finance their spending in retirement.

Furthermore, Mr. Sasongko need to make estimates about the needs of old age, and initial step is to estimate household expenditure when they retire.

Based on the records of income and balance sheet monthly household expenditures, household expenditures for Rp7 million per month. At retirement, their obligation to pay the mortgage (mortgage) has been completed and two beloved children no longer live with them.

Because some expense items reduced, Mr. Sasongko estimate that they only require 80 percent of the current financial expenditure to be able to have an adequate standard of living.

Thus, in later retirement years, Mr. Sasongko know that their life needs Rp5, 6 million per month or Rp67, 2 million per year. What next? They must find the source of funds for survival in the old days when they were not earning more.

Currently they already have two sources of income for such designation, the product of the Social Security savings accounts and life insurance programs they already have since several years ago.

In total premium benefits from both these sources could eventually provide income amounted to Rp50 million per year. Fortunately, they already have life insurance savings products so there is certainty of income sources in the old days later.

Based on the estimated quantities Sasongko Pak family needs in old age (Rp67, 2 million per year), there is a shortage of funds amounting to Rp17, 2 million per year in order to achieve their desired standard of living.

In addition, due to inflation, the shortfall will become greater. If their spending affected by inflation of seven percent per year, for example, means a total lack of funds will be Rp130.931.560 ballooned within 30 years (the amount calculated using the Future Value Table).

That is why, Mr. Sasongko need to calculate the amount of financial resources in the old days so they can finance the projected shortage of tersebut.Untuk find out how much money they need to collect, they first had to estimate the level of investment returns they can get at retirement will be.

This figure shows how much the funds they need at retirement so they could meet the shortage of funds that had previously predicted. When the results of investment amounting to eight percent per year, for example, means the family of Pak Sasongko needs capital for Rp1.636.644.500 when they retire.

This figure is obtained from the division between the magnitude of the lack of funds (Rp130.931.560) with investment income level (eight percent). During their funding of capital (Rp1.636.644.500) is not touched, the accumulated amount will provide an annual income as they need (Rp67, 2 million per year).

So, Family Pak Sasongko can know that they need the accumulated funds of Rp1.636.644.500 at retirement. Where does the need for these funds can be obtained?

The next step, Mr. Sasongko need to know the amount of funds they must set aside each month in order to achieve the target of accumulated funds. For example, the rate of investment return their funds amounting to 12 percent per year and the long investment period of 30 years.

Based on the calculation of compound interest factor to the Table for Future Value of annuity factor, the investment results obtained by the range factor of 241 333.

Thus, the amount of funds they need to set aside is Rp6.781.685 per year (or Rp565.150 per month). This quantity obtained from the division between the accumulation of funds that they need at retirement (Rp1.636.644.500) with the amount of investment yield (241 333).

That is, they must set aside funds Rp6.781.685 per year and this should result in savings interest rate of 12 percent per year so that the target of accumulated funds in the old days can be realized? Based on these illustrations, you can understand step by step what to do in financial planning in the old days.

More importantly, you’ve seen how important financial planning for old age! To accommodate the large accumulation of funds that you need later, you can equip themselves with life insurance savings products are designed so that you can get a guaranteed income which would, as surely as the standard of life you want later. Such planning requires an insurance agent and trained experts.

Within this context, involve a professional life insurance agent to discuss and design a financial planning program for the welfare of the old days you and your family.

Tags: finance, money, strategy

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