Wondering How Much Pension Would Be Adequate For Your Future? Calculate It Here!
Having a retirement plan is an indispensable part of your life as at some point, you’ll have to give up on your regular day job. This will also stop the consistent monthly flow of income that you’re currently earning from your organization.
Moreover, while you may be already saving money in your bank account, the bare minimum returns gained through it won’t help you survive through the growing rate of inflation, especially when you have no alternate source of income.
To enjoy your retirement, you should consider investing in a pension plan. You can use a pension calculator to figure out exactly how much you need to save. Fortunately, there are various investment options available in India to gain a consistent flow of income after your retirement.
However, when you have a host of options available at your fingertips, it’s important to make your decisions measured and backed by extensive research. The very first step to choose a good pension policy is to determine the adequate pension cover required by you for a comfortable future.
The easiest way to identify the required amount of pension for you is to use a pension calculator. If you’ve never used such tools before, need not worry because they are designed specifically to make your pension calculation easy with their intuitive user interface.
With that said, let us take a look at why there is a need for a pension calculator and how to calculate the required pension all by yourself through the medium of this article. Make sure you read it till the end to get a firm knowledge about pension calculation.
Why Is There a Need for a Pension Calculator?
Pension calculators are exceptionally handy tools that help you plan your finances for a comfortable and hassle-free retired life. Let us take a look at some of the major benefits of using a pension calculator:
Offers Financial Transparency
In case you are already on a retirement plan, using a pension calculator can allow you to determine how much amount you can accumulate before the end of your policy tenure. All you need to do is input all the required details and the pension calculator will suggest a figure for a monthly income that allows you to enjoy your post-working days.
Provides Ease of Usage
These National pension scheme calculators are very simple to use. Moreover, to make the most out of them you don’t even need to be that technically adept. It doesn’t even require any kind of registration or payment, which makes it a much more feasible option as well.
Allows Plan Comparisons
Online pension calculator tools can also be used to compare the retirement Corpus offered by various plants available based on the details provided to the pension calculator tool. This makes the task of choosing a good pension plan for your retirement days which helps you to fulfill your financial needs easier.
Aids Financial Planning
As you may already know the major function of a pension calculator is to help you determine the amount that is required by you to live a comfortable life in your retirement period. Additionally, it also notifies you whether your current plan is efficient or not, which helps you take adequate measures on time for a safer future.
How To Calculate Required Pensions by Yourself?
To calculate the amount of pension required by you, a formula is required to be used which is stated as:
Monthly Pension Amount = (pensionable salary * pensionable service)/70
If you are wondering what is pensionable service and pensionable salary, then make sure you read the definition for the two below.
Pensionable Service
Pensionable service is a figure indicating the number of years for which you have contributed to the pension account. As per the current laws, a pensionable service needs to be rounded to the nearest year which means if you are serving for six months or more, it will be counted as a complete year. Similarly, if your service is less than six months, it won’t be counted at all. Additionally, in case a person retires at an age of 58 years with more than twenty years of pensionable service, then they will be subjected to a pensionable service of a maximum of 35 years with an increase of 2 years in the service period as well.
Pensionable Salary
The pensionable salary is the average of your last drawn payments. Earlier it used to take an average of 12 months of your salary and was then changed to 60 months, with capping at rupees 15,000 per month, as per the current laws and mandates by EPFO. The SLP filed against this decision was also dismissed by the supreme court.
How Much Money is Contributed to an EPS Account?
According to the terms and conditions of your scheme, a part of the contribution made by the employer in the provident fund is used in the pension scheme. The maximum wages on which the contribution is made are limited to Rs. 6,500 and Rs. 15,000 every month. In case you have joined an employee pension scheme before 1st September 2014, then your maximum wage for contribution would be Rs. 6500 per month. On the other hand, the contributions made after 1st September 2014 are capped at Rs. 10,000.
Final Words
To be able to live a comfortable and sustainable lifestyle in your retirement, you need to know the required monthly income that is required to fulfill your financial needs. This can be done easily using a retirement calculator tool online. Hopefully, this article has provided you with a piece of sound knowledge about these tools. Moreover, as you may have read above, pensions can also be calculated manually using the formula as given above. Therefore make sure you use a pension calculator to plan for your retirement the easy way.
About the Author
Sunit Nandi I'm the leader of Techno FAQ. Also an engineering college student with immense interest in science and technology. Other interests include literature, coin collecting, gardening and photography. Always wish to live life like there's no tomorrow.
