All of us need a target in life to make progress.

How much pot one should build to retire and live off interest assuming a fully paid house in a city like Pune.

What kind of expenses one should assume for a family of four - Rs 500000 per annum at current value considering house is already taken care of? i.e. we need to keep inflation in mind.

What is the best way to keep the money once you have it inflation and other risks protected?
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  • One should retire only when the body fails.

    As for having fun and relaxing - that should be a part of your life every day. Retirement has nothing to do with it.

    Once you children are well settled and you own your retirement home outright, you dont need that much money to live. But you will need for travel and visits to children and grandchildren.

    Health will consume a big part of your budget.

    People thinking of retiring at 40 are not being sensible - taking a less stressful job is a better option
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  • Originally Posted by gurdial
    30 times your current annual expense invested at 8%-this factors in inflation,basic medical expenditure and other expenditures like replacement of white goods, renovation etc.

    Your case:-

    5 Lakh*30=150 Lakh

    150 at 8%= 12L

    Expenditure- 5L + 2L(other expense like new tv etc)= 7L
    Balance-12-7=5L : this amount remains invested.

    Off course you can better the 8 % return

    It is not such a straightforward calculation...

    Inflation is much more than 8%. These are just government figures. Realistically it is around 12-13%. You can read today's headlines in TOI. A few percentage difference in inflation and returns on your capital can make or break your retirement dream. Try playing around with this calculator and you will know what I mean.

    Retirement Calculator - How much to retire?
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  • Originally Posted by Venkytalks
    One should retire only when the body fails.

    As for having fun and relaxing - that should be a part of your life every day. Retirement has nothing to do with it.

    Once you children are well settled and you own your retirement home outright, you dont need that much money to live. But you will need for travel and visits to children and grandchildren.

    Health will consume a big part of your budget.

    AGREE 100 %.

    People thinking of retiring at 40 are not being sensible - taking a less stressful job is a better option


    I saw Interesting article on NET;
    Hope its useful for all.

    So now that we've been through the important parts of the why, let's start tackling the how of retirement planning by asking the
    No.1 retirement question: "How much money do I need to retire?"

    The answer to this question contains some good news and some bad news.

    First, the bad news: 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.

    Now for the good news: It's entirely possible to determine a reasonable number for your own retirement needs. All it involves is answering a few questions and doing some number crunching. Providing you plan ahead and estimate on the conservative side, it's entirely possible for you to accumulate a nest egg sufficient to last you through your golden years.

    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. These include the following:


      Decide the age at which you want to retire.
      Decide the annual income you'll need for your retirement years. It may be wise to estimate on the high end for this number. Generally speaking, it's reasonable to assume you'll need about 80% of your current annual salary in order to maintain your standard of living. (To learn more about how to do this, see Determining Your Post-Work Income.)
      Add up the current market value of all your savings and investments.
      Determine a realistic annualized real rate of return (net of inflation) on your investments. Conservatively assume inflation will be 4% annually. A realistic rate of return would be 6-10%. Again, estimate on the low end to be on the safe side.
      If you have a company pension plan, obtain an estimate of its value from your plan provider.



      A Sample Calculation
      Before we begin with our sample calculation, a word on inflation. When drawing up your retirement plan, it's simplest to express all your numbers in today's dollars/INR


      Read more: Retirement Planning: How Much Will I Need? | Investopedia
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  • One good thread revived.
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  • Agree. The richer we are, the poorer we are ... bitter fact :)


    Originally Posted by Vinod Gupte
    no amount of money is ever enough. not for me anyway. and ever honest person here will agree with it.
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  • Originally Posted by mangopeople
    Agree. The richer we are, the poorer we are ... bitter fact :)


    It's human nature i think. We are Happy but never satisfied. & it's good in one way..
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  • Originally Posted by real_pro
    It is not such a straightforward calculation...

    Inflation is much more than 8%. These are just government figures. Realistically it is around 12-13%. You can read today's headlines in TOI. A few percentage difference in inflation and returns on your capital can make or break your retirement dream. Try playing around with this calculator and you will know what I mean.

    Retirement Calculator - How much to retire?


    But in long term (20-30yr) there will be periods when inflation will be low as well. 8% is historically correct assumption.
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  • Originally Posted by real_pro
    It is not such a straightforward calculation...

    Inflation is much more than 8%. These are just government figures. Realistically it is around 12-13%. You can read today's headlines in TOI. A few percentage difference in inflation and returns on your capital can make or break your retirement dream. Try playing around with this calculator and you will know what I mean.

    Retirement Calculator - How much to retire?

    Thanks real-pro. Atleast we agreed to something.

    But man, what you said about inflation now further shows that RE bubble indeed exists !!

    BTW, consider this 13% inflation, capital gains tax & then let us know how much profit you made in FOrest County, I bet it isn't 30-35% as you claim if these things are taken into account.

    BTW, have you taken loan ? If yes, prefered PSU or private ?
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  • Originally Posted by realacres
    Thanks real-pro. Atleast we agreed to something.

    But man, what you said about inflation now further shows that RE bubble indeed exists !!

    BTW, consider this 13% inflation, capital gains tax & then let us know how much profit you made in FOrest County, I bet it isn't 30-35% as you claim if these things are taken into account.

    BTW, have you taken loan ? If yes, prefered PSU or private ?

    Boy, oh Boy...you are now after me in all threads...I think it is best we restrict discussions to specific threads...

    Anyways....I will respond to you here...

    13% inflation is an indication that all prices are going up including cement, steel, bricks etc etc. and is an indication that real estate prices will in all probability further go up...if you are a bear you will only look at it negatively...technically inflation is 13% since 2004...if someone would have bought your argument of inflation and bubble co-relation in 2004 and not bought a house...it would be a pity...how much % has real estate increased since 2004???!!!!!

    Your second point on capital gains tax and 30-35%...Again i am not selling the flat now...the point is that i have to pay 30-35% more if I intend to buy now...also, even if you consider tax etc etc if I sell now...it is way more positive than your propaganda of 30-50% fall in prices years back...you should compare the real estate prices since the day you started your propaganda and what they are now...you will have no argument here...

    i have not taken loan...it;s family savings and i liquidated a lot of my stocks and mfs...i am happy with that decision...
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  • Originally Posted by real_pro
    Boy, oh Boy...you are now after me in all threads...I think it is best we restrict discussions to specific threads...

    Nah, I am not after you, I am after posts.

    Anyways....I will respond to you here...

    Thanks.

    13% inflation is an indication that all prices are going up including cement, steel, bricks etc etc. and is an indication that real estate prices will in all probability further go up...

    The major part of inflation for CPI is food, fuel & likes & not cement.
    And check the prices of cement, infact, recently they have reduced.
    The cost of raw materials has not gone up with RE prices, only greed & fake promises of builders have.

    if you are a bear you will only look at it negatively...technically inflation is 13% since 2004...if someone would have bought your argument of inflation and bubble co-relation in 2004 and not bought a house...it would be a pity...how much % has real estate increased since 2004???!!!!!

    13% inflation from 2004 :D. If that is the case, why were interest rates 6-7% that time ?

    And don't see how much RE has appreciated from 2004, see it from 2008.
    Else see for past 20 yrs directly. Dates according to bulls convenience will yield no results. And what you forget is interest rates too. The EMIs too have gone up. Who will consider this into account ?

    Your second point on capital gains tax and 30-35%...Again i am not selling the flat now...the point is that i have to pay 30-35% more if I intend to buy now...

    But who is buying now at first place ? Thats the issue.

    also, even if you consider tax etc etc if I sell now...it is way more positive than your propaganda of 30-50% fall in prices years back...you should compare the real estate prices since the day you started your propaganda and what they are now...you will have no argument here...

    You should also see the inflation & cost of living as well. Look at fuel prices, had incomes been so high, there would hardly be any buyers for cars below 6 lacs. Hope you got the point.

    i have not taken loan...it;s family savings and i liquidated a lot of my stocks and mfs...i am happy with that decision...

    Then its good. Over-leverage with loan is bad, especially in RE.
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  • People who aspire to retire in 30's and 40's aren't really looking to give up working...actually they are looking to start working twice as hard but in somewhat new professions.
    Being adventurous but thinking men/women that they are, they don't want to jeopardize their family's future for the risks that they want to take.

    SO I would request you folks to NOT assume that aspiring retiree is a lazy bum. Quite the contrary. They are the biggest risk takers and driven people.

    My salute to all risk takers, for they are the ones who give new direction to the humanity. And most probably also give jobs to our kids.

    Here is some rough guideline about how much you should need before you can ignore the paycheck.

    A. WEALTHY RETIREMENT LIFE
    -----------------------------
    With 5 lakhs per year current expenses, you will need the following:
    1. 1 crore in investments (Mutual funds, stocks, bonds etc)
    2. 50 Lakhs in RE investment (Farmland, rented out flats, commercial RE rented out etc)
    3. 25 lakhs in Gold (or Gold ETF) as hedge
    4. 50 lakhs in FD+cash...which will take care of your next 8 years expenses (assuming FD interest will be beaten by inflation by some margin)
    5. Paid off home that you can live in for next decade
    6. Paid off big ticket items (white goods, interior of the home, cars, bikes) that you may not have need to replace for next 5 years with 75% probability)
    7. Term life insurance policy of 1 crore for both of the parents

    So basically 2.5 Crores with a paid off home will ensure that you won't have to work for sustenance.

    You will exhaust money in fourth item (50 lakhs in FD and cash) within 8 years, however, your investments in first item would have kept pace with inflation and you should be able to replenish your FD+Cash account by skimming some of the money from first investment. AT that stage, you may also need to liquidate your Gold and/or RE to fund children's education/weddings, your or your families own medical problems, however, thats ok and you will still come out ahead and will have abundant money left to reevaluate your investments.
    ------------------------------------------------------
    B. NOT-SO-RICH RETIREMENT
    1. 50 lakhs in liquid investments with some returns (stocks and MFs etc)
    2. 50 Lakhs in fixed maturity income plans (FDs, FMPs, Bonds)
    3. 25 Lakhs in FD+Cash for next 5 years
    4. Paid off home
    Your investments in item 1 will outperform inflation but investment in item 2 will be beaten by the inflation. So you will come out either even or slightly ahead.
    Right now, you can get 10% returns on your FDs and so lets assume you get 10% returns on your stock portfolio as well (if companies don't beat inflation by wide margin they will cease to exist...but its easier to assume that their growth will match inflation).
    So you will run out of 25 lakhs in 5 years but you will have 1.61 crores in your first and second investments in 5 years and you should be able to live happily everafter.
    --------------------------------------------------

    C. POOR RETIREMENT LIFE
    1. 25 Lakhs in FDs/FMPs
    2. 5 Lakhs as a passive investment in some grocery shop/restaurant
    3. 15 Lakhs in cash/FD for next 3 years
    4. 5 Lakhs invested in high quality dividend paying individual stocks
    5. Partly paid off home
    --------------------------------------

    Having said all this, I think a family should have a paid off home, no serious medical condition and 1 crore money well invested to live a life comparable to a family that makes 12 lakhs per year and doesn't own their home outrightly.
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  • Originally Posted by NG2012
    People who aspire to retire in 30's and 40's aren't really looking to give up working...actually they are looking to start working twice as hard but in somewhat new professions.
    Being adventurous but thinking men/women that they are, they don't want to jeopardize their family's future for the risks that they want to take.

    SO I would request you folks to NOT assume that aspiring retiree is a lazy bum. Quite the contrary. They are the biggest risk takers and driven people.

    My salute to all risk takers, for they are the ones who give new direction to the humanity. And most probably also give jobs to our kids.

    Here is some rough guideline about how much you should need before you can ignore the paycheck.

    A. WEALTHY RETIREMENT LIFE
    -----------------------------
    With 5 lakhs per year current expenses, you will need the following:
    1. 1 crore in investments (Mutual funds, stocks, bonds etc)
    2. 50 Lakhs in RE investment (Farmland, rented out flats, commercial RE rented out etc)
    3. 25 lakhs in Gold (or Gold ETF) as hedge
    4. 50 lakhs in FD+cash...which will take care of your next 8 years expenses (assuming FD interest will be beaten by inflation by some margin)
    5. Paid off home that you can live in for next decade
    6. Paid off big ticket items (white goods, interior of the home, cars, bikes) that you may not have need to replace for next 5 years with 75% probability)
    7. Term life insurance policy of 1 crore for both of the parents

    So basically 2.5 Crores with a paid off home will ensure that you won't have to work for sustenance.

    You will exhaust money in fourth item (50 lakhs in FD and cash) within 8 years, however, your investments in first item would have kept pace with inflation and you should be able to replenish your FD+Cash account by skimming some of the money from first investment. AT that stage, you may also need to liquidate your Gold and/or RE to fund children's education/weddings, your or your families own medical problems, however, thats ok and you will still come out ahead and will have abundant money left to reevaluate your investments.
    ------------------------------------------------------
    B. NOT-SO-RICH RETIREMENT
    1. 50 lakhs in liquid investments with some returns (stocks and MFs etc)
    2. 50 Lakhs in fixed maturity income plans (FDs, FMPs, Bonds)
    3. 25 Lakhs in FD+Cash for next 5 years
    4. Paid off home
    Your investments in item 1 will outperform inflation but investment in item 2 will be beaten by the inflation. So you will come out either even or slightly ahead.
    Right now, you can get 10% returns on your FDs and so lets assume you get 10% returns on your stock portfolio as well (if companies don't beat inflation by wide margin they will cease to exist...but its easier to assume that their growth will match inflation).
    So you will run out of 25 lakhs in 5 years but you will have 1.61 crores in your first and second investments in 5 years and you should be able to live happily everafter.
    --------------------------------------------------

    C. POOR RETIREMENT LIFE
    1. 25 Lakhs in FDs/FMPs
    2. 5 Lakhs as a passive investment in some grocery shop/restaurant
    3. 15 Lakhs in cash/FD for next 3 years
    4. 5 Lakhs invested in high quality dividend paying individual stocks
    5. Partly paid off home
    --------------------------------------

    Having said all this, I think a family should have a paid off home, no serious medical condition and 1 crore money well invested to live a life comparable to a family that makes 12 lakhs per year and doesn't own their home outrightly.


    NG2012....i agree with you that people retiring early are not retiring to watch cricket at home...they are looking to retire for a good cause...could be spiritual, social, satisfaction, emotional needs. As per Maslow's theory...one looks for Self-Actualisation at some point and considering today's corporate environments it is very rare anybody would achieve that. And 60 is too late to achieve self-actualisation...who knows who will survive till then! And even if one survives...how much energy would be left with the kind of food we eat and the stress we undergo to do anything else after 60!!

    good analysis on the numbers...however, I would be very keen to see some detailed spreadsheet on how you have worked out the Math for the above 3 cases. I don't see tax on returns factored in anywhere...Also, I feel that fairly accurate assumption on inflation and returns with good buffer needs to be there since few percentage points here and there really changes the whole ball game. Number of years considered post retirement is also a huge factor.
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  • Originally Posted by real_pro

    good analysis on the numbers...however, I would be very keen to see some detailed spreadsheet on how you have worked out the Math for the above 3 cases.


    Income taxes shouldn't matter a whole lot if a family is drawing barely 5 lakhs in income per year (inflation adjusted from next year).

    Instead of spreadsheet here are my super simplistic calculations:
    1. You have 40 years of life ahead
    2. You draw 5 lakhs this year and 5.5 next year (10% inflation)
    3. Your money also grows by 10%

    So with Rs 2.5 crores as initial capital, after 40 years, you will be still progressing
    With Rs 1 crore, you will hit decline after 10 years
    With Rs 1.5 Crores you will decline after 22-23 years
    with 1.75 crores you will decline after 30 years

    The snapshot:
    Initial investment Withdrawal
    250---------------------------------- 5
    270 ----------------------------------5.5
    291.5-------------------------------- 6.05
    314.6 -------------------------------- 6.655
    339.405 ---------------------------- 7.320
    366.025 ---------------------------- 8.052
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  • Originally Posted by compuwalah
    One good thread revived.


    Thanks Compu....
    Always appreciate your remarks/advise.
    savvy_v:)
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  • Originally Posted by NG2012
    Income taxes shouldn't matter a whole lot if a family is drawing barely 5 lakhs in income per year (inflation adjusted from next year).

    Instead of spreadsheet here are my super simplistic calculations:
    1. You have 40 years of life ahead
    2. You draw 5 lakhs this year and 5.5 next year (10% inflation)
    3. Your money also grows by 10%

    So with Rs 2.5 crores as initial capital, after 40 years, you will be still progressing
    With Rs 1 crore, you will hit decline after 10 years
    With Rs 1.5 Crores you will decline after 22-23 years
    with 1.75 crores you will decline after 30 years

    The snapshot:
    Initial investment Withdrawal
    250---------------------------------- 5
    270 ----------------------------------5.5
    291.5-------------------------------- 6.05
    314.6 -------------------------------- 6.655
    339.405 ---------------------------- 7.320
    366.025 ---------------------------- 8.052


    I meant taxes on the interest. Your calculation is assuming 10% post tax returns. Also, your assumption is if you have 2.5 crores, one should put a crore in stocks and MFs. Considering the scenario over past 5 years people haven't made any money in stocks..Do you think people will have the guts to put a crore (40% of their capital) in the stock market and retire now?

    I think beating inflation in a secured way is the biggest challenge.

    I have tried to use the bankrate calculator -

    Retirement Calculator - How much to retire? It shows the amounts clearly over years.
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