I recently met a 75 year old person who was saying that a 50 year old needs about Rs. 2 crore to retire (at age 60 years), and not a figure of US $ 1 million. In fact he said that even Rs. 2 crores is too much, actually Rs. 1 crore is enough.
If I were to look at his own life, I realize that he has not accurately calculated the money that he has used in the past 15 years of his retired life.
When I say you will require 1 Million US $ for you to retire, I am making the following assumptions:
1. In retirement you will buy at least one house. At this juncture if you decide to keep your current existing house, that will require a big cash flow allocation. http://www.subramoney.com/2014/10/buying-a-house-after-you-retire/
2. Assuming that you have medical insurance, please do remember that some of the illnesses require a lot of expenses that will NOT be covered by medical insurance cover (regular tests, supplements, vitamins, etc. ) this portion is self insured.
3. By the time you are 70 you may want to move into a simple portfolio – like bank fixed deposits or a LIC annuity pay out. Both these instruments are dull, boring, poor yielding, and taxable. So you are not likely to get a great post tax return, but these score on top in terms of simplicity.
4. Look at your own investment history. If you have a limited corpus, will it allow for mistakes.
5. The standard deviation in equity returns is so damn scary, and history is not a great guide. What if things were to go wrong?
6. Yesterday at the AIFW meet in Mumbai (1 Feb 2015) I spoke on this subject – and there were many questions on ‘what if equity goes wrong’ – sure that is a worry, but the bigger danger is in NOT BEING IN EQUITIES.
7. Remember if you retire at 55 and die at 94, inflation is a big worry. If you want to battle inflation, dementia, Parkinsons, a fall in the bathroom life is going to be tough. The greater the corpus, the greater the comfort level.
8. I asked Sundaram at the Aifw meet – and he was carrying Rs. 5000 – when he actually NEEDED NOTHING…- we carry excess cash so that ‘Just in case’ something goes wrong. So if I tell you that you require Rs. 4 crores for retirement, are you sure that you will accumulate only Rs. 4 crores? NO. We all like to keep a cushion, do we not? ‘Just in case’ kind of money.
now go to Pattu’s www.freefincal.com and see how much you need for retirement. Better still have a relaxant, and then have a look.
Take a deep breath, say a prayer, and then have a look. It helps.
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