Retirement mathematics is a very complex one…and who knows that better than me! I have refined my calculators a million times and sought help from Pattabiraman (of Freefincal fame)…regarding volatility.

However instead of doing a PhD in mathematics, let us look at some short cuts….

1. The American belief is ‘you need to provide for 80% of the expenses at retirement…..

ok if your expenses are say Rs. 55,000 when you are 50, the chances are that your expenses would be about Rs. 150,000 at the time of your retirement when you are 58 or 60.

I do not agree with this calculation AT ALL….even if this is right,

For most people as soon as they retire, their expenses INCREASE. They start travelling – attending weddings, thread ceremonies, baby shower – with a vengeance! They should be asked ‘what do you wish to do’ – and the real nos. will fall in place…and that is LIKELY to be more, much more than the expenses at retirement.

2. A house in which you live + 1 Million US $….about Rs. 6 crores…now!!

3. the expenses at the time of retirement – annual expenses * 40….so if you are now aged about 50 years and your expenses are about Rs. 1L p.m, chances are your expenses at retirement would be about Rs. 1,75,000 (assuming that is!)* 40 = Rs. 7crores.

…see what suits you…most calculators lead you to the 1 Million US $ figure…and if you do a detailed calculation….even more…so START TODAY, NOW!!


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  1. I wholeheartedly agree with point number 1. When you are not working your lifestyle expenses really shoot up just because you have more time for these kind of activities. I can personally vouch for this because during my recent 4 month career break my monthly expenses shot up 5 times. Mainly because of travelling, eating out frequently etc.
    So beware!

  2. I have seen this $1 Million figure and 1 Lakh per month post-retirement expense scenario quite often in your blogs.. I am mentally blocked with my kind of calculation as follows for the 1 Lakh/month scenario
    – Assume (irrespective of age) that I live in my own house and my today’s expense is 1 lakh per month that factors in replenishment of whitegoods, car, holidays, real living expenses, maint of a house etc. I have a decent medical coverage for emergencies and separate basket covered for other planned expenses like children’s education/marriage etc.
    – With this background I am assuming the following scenario :
    1. A 2 crore debt portfolio will comfortably meet by today’s 1 lakh/month requirement. I know that even the worst annuity products like LIC have 1 Lakh/month annuity with a one-time investment of 1.76 Crore with benefit of return on purchase so my kin can inherit the invested amount post our death. I am sure with a mix of products including debt funds, FDs etc one can comfortably extract 1 lakh/month in a tax-efficient way from this debt portfolio

    2. For inflation I am thinking if I today have 1 crore equity portfolio into 3-4 MF schemes that are well rated and well reputed and I put in growth option of these schemes then through Systematic withdrawal I can comfortably take out my inflation component expenses every year while my equity portfolio keeps building ( assuming on long-term average the returns on these investments will be atleast inflation+nominal gdp %). So, at end of life I can see that my kin inherit this portfolio too.

    3. For extreme medical and unexpected volatility for a five year periods etc I can keep say 10-15 Lakh in liquid funds.

    Now with this scenario I can assume that a person is financially independent with 3 to 3.2 crores. This corpus as I see it will give perpetual inflation protected income as long as you have control on your today’s expense and expect it to remain in the ballpark of today’s average with inflation adjusted. Post your life your kin can still inherit this wealth too.

    I don’t know what I am missing here but this mental block seem to guide my current savings pattern and seem to be in my calculation of when I think I will be financially independent. What am I missing here.. I know life if full of uncertainty.. is the cost of uncertainty so high that I should be saving the double of what I planned so as to enjoy financially independence.


  3. Thanks Subra. I see your point on risk. But even if my double my savings I still have the same risk. It is not going to be mitigated except I might have some cushion based on more diversified debt portfolio.

    Do you think there is also a risk on products like Annuity purchases on lump-sum amount whose sole purpose is to give us life-long steady income (thought not inflation protected).


  4. Risk like reinvestment risk do not change because of quantum of investment. If you do not do laddering you will run maturity risk, interest rate risk, inflation, etc…and u will need good debt management skills too. I HAVE NOT seen good debt mgt skills AT ALL with retail…also u are forgetting income tax..Debt CANNOT GIVE more than 5-6% in GOOD TIMES……

  5. Subra.. thanks.. I see your point better now.. so one has to be super good at debt management skills to be able do laddering to pull off my scenario.. I agree on income tax. Though I didn’t really explicitly factor in, my assumption was to rely on tax-efficient debt instruments where indexation benefit, long-term capital gains etc can be appiled.


  6. Is there a typo in point #3. 175000*40 is only 70 lakhs and not 7 crores. Could you please elaborate that thumb rule? Is it supposed to represent the monthly expense or the retirement corpus required?

  7. If one works at a dividend + rental income + tax free interest inflow to cover expenses?
    House, medical insurance, emergency fund taken care of.

  8. Balaji,
    I agree that 3 cr is good enough to feel secure. I don’t agree on the mutual fund part though. Only direct equity can make a difference. That is assuming one knows understands it well.

  9. I have a simple strategy
    Invest 1 years expense in Liquid fund
    2/5 years expense in debt funds
    and above 6 years expense in balanced/index funds depending on investor’s risk appetite and rebalance every year.
    What’s your view Mr.subra

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