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Dear Srini, first of all thanks for sharing your experience and your suggestions, and the tools you recommend, including excel sheets in this thread.

After reading through the posts here, I at least started thinking on this serious topic of retirement planning and I am starting my journey immediately, now when I am 44 years old.

I also downloaded your excel sheet and put my numbers in, and I couldnt believe the numbers ahead I need to target. But anyways its better late than never.

Thanks again.

regards,
narayanang76

I have not yet opted for annuity plans. Currently, I decided to grow the money by investing in Stocks and Mutual Funds.

Also, the income from Annuity plan is taxable. The consultants for this recommend "Deferred Annuity plans" wherein you lock the interest rate today and you get the proceeds after 60. Till retirement no payment is paid and is considered accumulation phase.

Although OT here, but we should have a separate thread regarding having children vs. choosing to have a child-free life. Although personal but it would be interesting to hear fellow BHPians views on the same, especially in the Indian context on why they took either of the two decision.

Yesterday only I had a discussion on the same topic with a friend. Her argument was if she were a tiger woman, she definitely will have children of her own but not in this over populous, far from getting extinct human species world.

Sorry for going :OT.

Apart from the financial implications on retirement this pic conveys how the world, in time, would be forced to change its views on the political correctness or otherwise of having kids.

Wow! :Shockked: I will never feel bad riding my bike cross country! Haha.

There's this other thread which asks what you have done to reduce your carbon footprint. I was wondering what i would write there.

Now i know. :D

If a calculator uses both kinds of numbers that you mention, it is way over-optimistic. Assuming that you can drive some tax efficiency, 6 or 6.5% may be a better number for expected return from debt instruments.



Inflation is nowhere near 5% for the typical spend that this forum readers would have. I typically use a 8% figure - expenses on health, etc rise quite a bit.



The calculators have to make some assumptions - conservative, moderate or aggressive. There could be periods - hopefully short - where the real world could behave very differently. One way to address this would be to build some buffers. But then, people already feel that the numbers from the calculators are too big...

The annuity plans have a major problem in India. And it is related to the 'big numbers' that the calculators show up. Almost all annuity payments are a flat number through all the years. If the inflation is 7%, the expenses would double in about 10 years. If your annuity was sufficient at 60, it would be only 50% sufficient at 70. OTOH, if the annuity were to be sufficient at 80, you would need to get 4x the expense at 60 and probably pay a good amount of tax and re-invest.

IMHO, the annuity plans evoke the comfort of pensions, but unlike the government pensions of yore, they don't keep up with inflations.

They may be useful over short periods - say a decade or so.

Story of 42-year-old millionaire and founder of the hugely successful financial advisory website - "financial samurai" - who tried to retire early and failed.

Here's what went wrong:

https://www.cnbc.com/2019/12/19/42-y...acebook%7Cmain

The basic things in his case which went boom, were the fact that he had the “Kid” and that immediately put pressure on his head. Next, he chose to continue to live in an expensive city when he could quite easily have buzzed off to a far away suburb or another city. But his is the problem typical of most parents in the US, Australia and elsewhere - the need to be close to a “Top” “School District” which automatically drives the cost of living up significantly. Expensive Private Schools and Extra Curricular acitivities also end up costing a lot. So back again we are, to the fact that he could have managed perfectly were it not for the “Kid”.:)

Passive income of $250,000 per year and still they struggled. I did not read the full article. This bloody Americans!

Another very good article in todays ET.
Worth reading if one is serious about FIRE.
And this somehow seems to be in the ballpark in ref to the on going debate on required Corpus!
However as always, there are still lots of variables. Rate of Interest, Rate of Inflation.

Recently, I have been watching a YouTube channel called Subramoney and have tried to come up with a plan for quantifying my retirement corpus. I am using some sample figures in order to give you an idea about the method I learnt from watching those videos.

Current age (as of 2020): 32 years

Retirement age: 60 years (i.e. year 2048)

Current annual expense: 18 lakhs (i.e. 1.5 lakh per month)

Current retirement corpus: 1 crore

Inflation rate: 7%

Annual expense at age of 60 years: 1.2 crore

Retirement corpus needed at the age of 60: 36 crores (30 times of annual expense)

Rate of return required: 14%

As shown above, I assume that annual expense for a household (5 members) in Mumbai is 18 lakhs per year. Assuming inflation rate of 7%, my current expenses (i.e. 18 lakhs per year) would rise to 1.2crore per year by the time I am 60 years old. As per a thumb rule, your retirement corpus should be 30 times your yearly expenses i.e. 30 times of the annual expense when I am 60 years old. This comes out to be 36 crores (30 multiplied by 1.2crore). If the value of my corpus currently is 1 crore, I would need to compound the corpus at a rate of 14% in order to reach my target.

I was shocked when I applied this method as generating a 14% return seems pretty steep. Please note that the 14% return will be achieved from two sources 1) Organic growth in value of my current investments and 2) Contribution from my salary over the coming years to this retirement corpus. Reducing expenses is also one way but I think it will be difficult to trim expenses.

The estimated figure of 36 crores seems huge even though I know that this amount is required at the age of 60 years (and not today!). Also, I am aware of the fact that my estimate of my current expenses (18 lakh per year) might also be on the lower side in a city like Mumbai.

Would you have 5 members in the house at the time of retirement. Maybe you need to review the potential expenses.

Since we cannot predict the situation of the family 20-30 years from now, we will have to make assumptions. The above figure looks scary because it is a conservative estimate in my opinion. Maybe at the age of 60, I might need to hire a full time caretaker/nurse if my health or my wife's health deteriorates significantly. My current annual expense does not include any major medical expense but that might change when I am 60 years old.

I'd say the best retirement plan is your and your family's health. The more healthy you're the better, so take lifestyle changes seriously and get a good health insurance so that you can face the curve ball time and God can throw at you at any point. That ensured then you can build on the assets and a safety net. Without a healthy body you can't enjoy your retirement.