Let’s Consider an Example Mr Kumar, 35 years, married with lady, has kids and is in a stable job His monthly committed expenses is approximately 1 lakh / month Committed implies essential and unavoidable expense His non committed expense is 2 lakhs / year
Non committed means to say: something like vacation, buying gift for someone. Now he plans to retire at 60 years His monthly expense will not be 1 lakh / month when he retires at age of 60 years It would have increased to 430000/ month when he retires considering inflation of 6% Inflation is also getting compounded His non committed expense would be 9 lakhs / year
Let’s consider his life span is 80 years So he will live for 20 years following retirement Total corpus needed will be 4.3x 12 x 20 + 9 x 20 = 1210 lakhs That’s is approximately around 12 cores
This is over calculation because majority feel the expenses will be reduced in Retired life: But we never know, it’s better to overestimate the requirement and then underestimate.
The above calculation does not take into account post retirement return from investment amount inverted and withdraw the monthly requirement from the pool: at time of requirement the corpus needed will be at least 10 crores This is the required corpus Needed 10 Crores
The next question is where do we invest? So how much should one invest / month towards the retirement goal only if one has to be achieved the desired retirement corpus. Let’s have following assumption 1. The returns expected out of our monthly expenses over next 25 years will be 8% (post taxation) : it does not mean one has to redeem or book capital gains regularly It just means
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