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. Assumptions in America are based on their economy and their social system.

    1) Most people in America retire by mid 60s (that’s when Social Security payment and Medicare starts). By that time, people have covered most of their family responsibilities. The late retirement age also means they look for lesser number of years in retirement as compared to Indians.

    2) The growth rate of economy and inflation are much lower in US. If the inflation is in 2-3 % range; the calculations are different.

    3) Most of Americans downsize their lifestyle when they retire. Since they don’t need to leave in bigger cities, they move to smaller places or retirement towns. That reduces their costs significantly. In India, you rarely see downsizing their houses/cars, etc.

  2. Retirement planning is based on forecasts.and future cannot be forecasted. Its total based on assumptions. So yes we should plan our retirement but whatever be the amount, it doesn’t guarantee u a peace of mind in old age.because its an old adage. Money cannot buy everything.the youth must focus on values and people and the same should be roped in their children,only then shall they be able to live peacefully.because what you sow ,is what you reap. I do write a blog. Visit if u wish

  3. Subra,

    I know you believe in prodding people to think. You never give the solution.

    Any approach towards finding the correct retirement saving size is not complete till we also see what you intend to do with it after you retire. What returns will the savings bring? Many are unwilling to see the growth in monthly living expenses over 20 years. The figures look really scary even with 8% inflation.

    Apart from the social security available to US retirees, Indian lifestyle will soon approach the same set of conditions. We already see growth in retirement homes etc. Not bad to factor in these conditions.

  4. I am a retiree and I keep track of my expenses on month to month basis for the last 5 years and I have noticed my expenses are growing at the rate of 12% pa. I don’t own car, vegetarian, no habits. It scares me that financial planners in India just assume 8% inflation.

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