If you are 45 years now... this is how you do the math

Assuming that you are 45 years of age now, and expect to retire at the age of 60, and your monthly expenses at that time will be Dh30,000. Now, most analysts agree that, after retirement, an individual needs around 70 per cent of his pre-retirement monthly expenses to maintain a similar lifestyle. That works out to Dh21,000 per month that you will need after age 60.

Assumptions:
A. Current age: 45
B. Desired retirement age: 60
C. Projected pre-retirement monthly expenses (in 2027): Dh30,000
D. Required post-retirement monthly income (70% of c.): Dh21,000
E. Interest: 6%

In this scenario, after you reach your retirement age (60), you’d need a fund value of Dh4.3 million which, at 6 per cent interest, will give you a return of Dh252,000 per annum, or Dh21,000 per month.

To start saving that amount from today (age 45), your annual contribution needs to be Dh184,739.89, or about Dh15,395 per month.

Below is how it all pans out, but remember that this is just an illustration of the required amount depending on a particular age-bracket and interest rates on fixed-income products. Actual figures will vary for each individual depending on multiple variables like age, projected post-retirement expenses, investment avenues, etc. It’s best to take the advice of a dedicated financial advisor to calculate your particular investment needs.

Fund Values for the next 15 years

Year     Annual contribution    Total Fund Value (Dh, cumulative)
1          184,739.89                184,739.89
2           369,479.77                380,564.16
3           554,219.66                588,137.90
4           738,959.54                808,166.06
5           923,699.43                1,041,395.91
6           1,108,439.31             1,288,619.54
7           1,293,179.20             1,550,676.60
8           1,477,919.08             1,828,457.08
9           1,662,658.97              2,122,904.39
10         1,847,398.85              2,435,018.54
11          2,032,138.74             2,765,859.54
12          2,216,878.62             3,116,551.00
13          2,401,618.51             3,488,283.94
14           2,586,358.39            3,882,320.86
15           2,771,098.28            4,300,000.00
Source: Emirates 24|7 calculations

Follow Emirates 24|7 on Google News.