At what age should one retire? How much money should a person have for retirement? Is retirement an age or a sum of money? Are there any great activities that I love to do which is PULLING me towards retirement or is the calendar PUSHING me towards retirement?

These are questions that an individual has to answer for himself or herself. However there is another concept called a ‘permanently funding portfolio‘. It is a simple and easy to understand concept. Let us say there is an individual who has an annual expense of Rs. 300,000 and he is now retired.

Assume he has a portfolio of Rs. 30 million (Rs. 3 crores) – and this is split between real estate, equities and bank / other fixed deposits, etc.

His income is as follows:

Rent               400,000    Interest        700,000     Dividend      400,000

To meet his total expense of Rs. 300,000 he has created an asset base which gives him Rs. 15 lakhs. Out of this amount, it is fairly obvious that Rs. 12 lakhs is getting reinvested in assets like bank deposits. If you can create such a portfolio – and 3 income sources – where each one has a cash flow level greater than your requirement, and adjusting for inflation, you are really retired (and wealth, dammit!).

A small corpus and constant worries about random choices in life is not a ‘comfortable’ retirement.

Like a friend said ‘as long as I know that whenever I update my passbook  I see 7 digits without having to worry about the last paisa being utilized well, I know I am happily retired’. True.

Creating adequate cash flows by the age of 40 is TOUGH. Especially for those who have to create all the capital, spend decently on oneself, and retire well. Of course if your plans are to buy a 4500 sft. beach house, then u need money accordingly. Even in Chennai this house will cost Rs. 5 crores…so welcome to the world of retirees…:-)

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  1. Subra,
    This needs an update in the second last para. you cannot update passport. You have to update passbook 🙂

  2. Retirment is really complex only if it is not smartly planned. if we are desciplined, it can be fairly simple.

    Start off early and aggressively:
    There is saying “Early Bird Gets Fish”. The more you save initially the faster you reach your Goal. There are many offlate who get offer letter of 6 lakh as fresher. Invest only your first year salary. this 6 lakh in 35 year could grow to 8 crores if ivested in MF – assuming growing at 15%.

    Even if first year 50% that is 3 lakh invested. this will grow to close to 3.9 crore. Even FD @ 10 % will give 1 crore in 35 years.
    Just invest your first year salary without mercy……

  3. so technically, you should spend only the ‘real return’ – the gap between return & inflation/taxes/costs. if that is feasible, one can return right away (assuming some cushion for the years where return may not be as promising). is that a correct assessment?

  4. Lot of discipline, self control is required in initial years of your income to achieve this dream. 🙂

  5. hmm and luck. If you started in 2001 and had the patience to keep adding right till 2007, you would have created a good corpus. If you started in 2007 and then tinkered..when it went up, down, sideways…you would have suffered. For lucky people like us (who are investing for 30+ years) main corpus creation has happened. For people like my dad (STILL doing a SIP) who have been investing for the past 55 years – the dividends and cap gains being tax free has helped. Of course if it is over such a long time the importance of skill, luck, timing and compounding – all play a role.

  6. The above retirement plan works best if one has his own fancy house, a sedan, children Employed-Married-Settled. Ofcourse they should have no loans. A rare case study to get.

  7. Wow. So who is lucky – Dad, Son or daughter… God Bless.

    Dream retirement portfolio indeed, plus or minus individual comforts.

  8. Rs. 3 crores + house at retirement for a person retiring today is a NECESSITY, not a luxury.

    His Rs 1 crore each in equity, RE and Debt instruments would be considered by most people. I actually am comfortable with this guy putting about 20k pm in an equity SIP. He is not spending anything on the house (given on rent – renter picks the bill in Chennai, unlike Mumbai where the land-lord picks up the tab). His debt portfolio has MIP (ST), Income fund, bank fd and fds in a couple of good companies like Hdfc Ltd.

  9. very few people realise the effect of inflation. If you require 45000 per month today for your expenses, the same amount will rise to about 15 lakh per month in 35 years time.

    The only real solution is to have a retirement corpus wherein you do not withdraw more than 3-4% per anum for your expenses in early years and to gain a overall return a couple of % points above the inflation during your retirement years. This means equity exposure till you die.

    Another thing is to have income from sources not coming under income tax. A thing that will become increasingly difficult in coming years.

    People are living longer these days. This can be a blessing with good corpus or a curse to your children if you are not prepared well.


  10. get a joint property…and split the deposits. Afraid of clubbing? bah…no Ito is too concerned about this.

    invest in 80C =100,000 in nsc/ppf/elss. on Rs. 100,000 you will save tax. And as your age goes beyond 6o, then, 80….your tax liability will be close to zero.

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