7 Questions to Know Suitable Return Target for Katsuyo/Retirement Period-type Investors

Below there are seven questions for you to answer who is Katsuyo-type investor (investment during retirement period), who want to manage their wealth through investment to fulfill their next needs. Here will use Mr. B who is 57 years old as an example.

1. What Life Event is Your Target?

 For those who already years into their retirement period or those who just started, like it or now still need to think about their financial condition for continuing their life. We donââÅ¡¬ÃƒÆ’¢Ã…¾¢t know how long we will live, what we know is if we are graced by long age we definitely need fund to support our life. Not to mention for those who want to inherit their wealth to their children and grandchildren. For Katsuyo-type investor (investment in retirement period), this is the ââÅ¡¬ÃƒÆ’…Life EventââÅ¡¬ that becoming the target.

2. How Much is the Amount of Your Total Savings Currently?

Firstly, what need to be noted is how much is the total of your savings so far. LetââÅ¡¬ÃƒÆ’¢Ã…¾¢s sum-up the cash, bank savings (including time deposit), and other assets with fixed value. Exclude the assets with fluctuating value like stocks or public bonds.

After totaling all of them, Mr. B has total savings of Rp. 2.500.000.000.

3. How Much Fund is prepared for Emergency Needs?

Although have fulfilling all needs in life like buying the dream house, funding children education, and other major expenses, it is undeniable that we still need to prepare for the unexpected. Usually as the age increase so does the medical expense. That is why we need to set aside some fund for unexpected events like that.

For Katsuyo-type investors, 20% of the savings calculated from step 2 can be used as guidance for preparing emergency fund. Mr. B who has total savings of Rp. 2.500.000.000 can set aside the 20% of the fund which is Rp. 500.000.000 as emergency fund and not using it for investing.

4. How Much Surplus Fund that is going to be Invested?

Form the amount of total savings we got from step 2, letââÅ¡¬ÃƒÆ’¢Ã…¾¢s subtract it with the emergency fund from step 3. Well then, this is the amount of fund that can be used as investment. Mr. B has investment fund of Rp. 2.500.000.000 ââÅ¡¬“ Rp. 500.000.000 = Rp. 2.000.000.000.

5. How Much Fund can be Retrieved Every Month?

For Katsuyo-type investor, besides from investing their surplus fund, they also want to use the money they got so far little-by-little every month.

The daily expense of Mr. B after retiring can be covered by public pension fund and corporate pension fund. Apart from that, Mr. B use his savings every month Rp. 10.000.000 for occasionally fulfilling his secondary needs such eating in fancy restaurants or go on a trip with his wife.

6. How Long You will Investing?

While enjoying the retrieved fund that has been determined in step 5, letââÅ¡¬ÃƒÆ’¢Ã…¾¢s specify how long investing the fund that has already stated in step 4.

Now Mr. B is 57 years old, still healthy and ready to live even longer. He want his economic condition to be stable until he is 90 years old. Because of that the investment period he need is 90-57 = 33 years.

7. In Order to Achieve the Target, How Much is the Investment Return Needed in a Year?

Finally we arrived at the last step. In this step letââÅ¡¬ÃƒÆ’¢Ã…¾¢s determine how many investment return needed to keep the economic condition stable according to time frame set in step 6 while also enjoying fund from the investment return every month.

Calculating this is very complicated, for that purpose let us use the ââÅ¡¬ÃƒÆ’…Financial Calculator (Money Retrieved & Return)ââÅ¡¬ that present in Morningstar website. For Indonesian readers, the same tools also present in Pasardana.id website that affiliating with Morningstar Japan. By inputing the needed fund amount, you will immediately know how much is the investment return needed. In Mr. B case, after using Financial Calculator, the result is 4.7% investment return needed yearly.