Sadly or happily I get recognized at some public functions or even public places. And people ask me many questions – largely related to the equity markets, mutual funds or the toughest of them all, Retirement planning.

The toughest question ever is ‘I have Rs. 4 crores, do you think I can retire?’ – just change that figure to X and I must have been asked about 1000 times, and I have to think of amazingly inventive ways to give a non- answer.

Here is an honest attempt to answer the question. Rather it is an attempt to say why I cannot answer the question.

Simply because I need to ask you many many more questions, some of which are:

What is your name and email address? I cannot over 3 minutes give you an answer – how much so ever you may want it.

What is your current income and when is it likely to stop? Honestly is this an accurate answer?

What is your current expenditure, what is the inflation rate APPLICABLE to you?

If you do not know the inflation applicable to you , is it because you do not know your current expenditure?

How will your expenditure change when you retire? Really? Have you spoken to your spouse?

Do you have any sensible pension plan? Do you know that annuities in India are at 6% p.a. and that the income is taxable?

Are you likely to get some inheritances? Is there some way you can put a date to that…or should I ignore it?

Will you downsize at say age 70 years? Will you want to shift to a cooler /warmer / drier place? Have you provided for that?

What are the assets that you have?

Do you realize that your so called assets like a Road bike, Golf kit, Paintings, are nice – but to me they have NO commercial value.

Do you have any other sources of pension? how trustworthy and how indexed?

Fine. Once you reply to these questions. We can have a 3 hour discussion along with your wife. And I need a laptop, a white board, and one marker pen. And 3 dusters.

We are going to erase far more than what we are going to write.

And I will tell you why the pension calculators are excellent guides, but just not sufficient for you to plan.

Go and play Golf.

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  1. Few questions :
    1- What about idea of SWR? What would be a good rate range applicable in India? I understand it would depend on age at the time of retirement.
    2- What would be a good inflation rate workable in India? For example 2% would be too low however much lifestyle slide you take and 10% while close to realistic may make corpus accumulation ridiculously hard.

  2. SWR can work only for those who have a huge corpus wholly in debt so that there can be a flat SWR. He/ she will have to pay tax on the annuity..For others it has to be a basket from which to manage his day to day activities with a liquid fund. Have 4 years expenses in income funds and the balance in equity funds…

  3. Do you have any lifestyle diseases (diabetes,bp) + pre-existing medical conditions (past surgeries etc) ?

    medical insurance? separate medical corpus?
    staying alone or doing unpaid servant / watchman work for children (watching their kids etc)

  4. By retirement if the person meant doing something which he likes and generating passive income – I feel he should go for it if he has 25 * (current annual expenses) as corpus.
    Where does the 25 number comes from, it comes from assuming 4% after tax return on corpus. It can be less if he can generate more returns!! Simple!!

  5. The best way is to limit your withdrawls to whatever you earn above the inflation rate. This will ensure you do not cut into your capital in the first 10 years of your retirement.
    I appreciate the way Subra writes. Never give answers straight. Make people think. This is the best way of education.

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