Factors to Consider
There really is no single number that would guarantee everyone an adequate retirement. It depends on many factors, including your desired standard of living, your expenses (including any medical costs) and your target retirement age.
There are several key tasks you need to complete before you can determine what size of nest egg you'll need in order to fund your retirement. Likewise you may use our Baiduri Bank "Retirement Needs For Your Future" to calculate the amount require for your retirement. Below table show an example of what you need to consider:
This calculation is purely for illustrative purposes and is exclusive of inflation. You may also try out the Retirement Calculator provided by TAP at www.tap.com.bn
Keep Inflation In Check
Retirement planning requires time planning spanning several decades, therefore you need to consider the effect of inflation. Inflation is a rise in the general level of prices of goods in an economy over a period of time.
In Brunei, inflation for 2011 was estimated at 2%*.
As per the example illustrated above, the retirement saving goal is $600,000 (in today dollars) nest egg 25 years from now. To express this in the dollars of 25 years from now, we simply multiply $600,000 by 1.02 (inflation rate of 2%), 25 times.
*Source: CIA World FactBook
Likewise, you may use a financial calculator to calculate the future value of the amount by following the below steps (using Casio FC-100V):
Step 1: Press "CMPD"
Step 2: Select "n" and key in "25" then "EXE"
Step 3: Select "i%" and key in "2" then "EXE"
Step 4: Select "PV" and key in "600000" than "EXE"
Step 5: Select "PMT" and key in "0'
Step 6: Select “FV” and press "SOLVE"
As shown above, a $984,360 nest egg is much larger than $600,000. This is because of the effect of inflation, which causes the purchasing power to erode and wages to increase over time.
Hence, it is important to keep inflation in mind when you determine how much you need to save for your nest egg every month by simply checking the inflation number each year and revise your contribution accordingly.
Questions you may have about Retirement Planning
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