Excel inflation-indexed annuity calculators to plan your retirement

Published: January 9, 2014 at 1:58 pm

Last Updated on September 4, 2018

Retirement planning is the single most important financial goal common to every individual.  It is the only financial goal in which a corpus would get spent over the course of decades!

Retirement planning is simply non-negotiable.  The cost of postponing systematic retirement planning is more dangerous than inflation.

Regular readers would be aware of that a wide range of retirement calculators is available at freefincal for efficient planning.

Anyone, from the absolute beginner, to someone planning early retirement, to someone nearing retirement, can use these tools to evaluate their options.

There are also two unique tools for someone close to retirement (early/normal: to plan their post-retirement investment options

When I was trying to put together an article on ‘how to generate an inflation-protected income stream with a lump sum’, I realised the need to answer the following question:

Given a lump sum, what is the rate of return required to generate an income that increases in step with an assumed inflation rate for the reminder of our lifetime?

Since none of the existing calculators explicitly answer this question, I decided to make one.

Here are four calculators that will help you answer:

  1. What is the corpus required, for an assumed annual payout(annuity/pension), inflation, rate of return and duration?
  2. What will be the annual payout, for a given corpus, assumed inflation, rate of return and duration?
  3. How long will a corpus last, for a given corpus, assumed annual payout, inflation and rate of return?
  4. What is the rate of return required to ensure a given corpus lasts a specific duration for an assumed inflation and rate of return? (new addition)
  5. I have also included the retirement planner for beginners so that the file can be used all – those, far from retirement, close to retirement and in retirement!

Note: These are called annuity calculators. Well, at least the math is referred to as annuity calculations.

Strictly speaking an annuity represents an annual/quarterly/monthly payout made by an insurer after taking a lump sum from a retiree. In India, annuities are not linked to inflation. LIC offers an annuity that increases 3% each year.

If a retiree has a large corpus, buying an annuity is the very last thing a retiree should do!

Annuities are strictly for those  who cannot afford to allocate a part of their nest egg for investment and must use the entire sum to generate income from the first year of retirement. Sadly such income will be constant and will lose value with time.

So although I call them as annuity calculators, it is important to remember that calculations are made for inflation-indexed income.

Download the inflation-indexed annuity calculators (Apr 2014). Revised after incorporating Mr. Masilamani’s suggestion 

Download the inflation-indexed annuity calculators (Jan 2014)

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements write to pattu [at] freefincal [dot] com
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