I had this conversation with a bunch of Millennial…

  1. I wish to retire at 43 is it possible?

The answer is NO. You are now 25 years of age and are earning Rs. 4L a year. This is not a great salary, but you will not be able to invest more than Rs. 3000 a month after paying off your taxes, rent, food expenses…etc. I am not commenting on the quantum of money that you are saving, but this is surely not enough for you to retire at 43. More importantly you have to estimate that you will live till the age of 100 (if you die early, it would still be 94 or 95). Which means even at current expenses of Rs. 4L a year (you are a bachelor) it will be Rs. 30L by the time you are 43. At that time you will need about 40 times (the 30 times rule will not work for early retirees)..so that means about Rs. 12 crores. You will be nowhere near that figure.

  1. What should be the steps that I need to take for my retirement? I am 24 and just started earning Rs. 6L p.a. and can invest Rs. 15000 per month for RETIREMENT.

Ans: Wow. I am impressed with your ability to save Rs. 15k pm just for retirement. I guess this comes from the fact that you stay with your parents, and do not have to pay for food or rent. That is a big cash saving especially at the start of your career. I am assuming that you will get married at the age of 30, and then your expense pattern may change a bit. Right now I would suggest a Multi cap fund – with say 50% large cap, 30% mid cap and 20% small cap. Just start your sip of Rs. 15000 and keep increasing the amount by 10% every year. Do look at it regularly, but you don’t need to interfere in the compounding process. Bas lage raho. You will reach your destination on time. Maybe before time.

  1. My IFA used to tell my father “19% return is a given” about 5 years ago. Now he has changed his tune and he says “15 percent”. You in your blogs say 12%. Over the past 4 years I have got even worse returns than 12% p.a. in a Bluechip fund. What number should I really believe?

Ans: Fair question. It is difficult for a youngster like you to know what is a good number to target. Frankly, all of us are BLUFFING. None of us have a clue how the economy will function over the next 30 years. So whether it is your dad’s IFA, the FM, the PM, Niti Aayog head or me myself, we are all assuming some number. This is essential because we can’t tell you “some number”. It will not work in excel. Excel needs a number. So look at that Retirement calculator that I sent you. Let us estimate that you will require Rs. 20 crores for retirement. Suppose the amount that you require to invest is Rs. 5000 per month, and you will keep increasing the amount at 10% year on year. We are assuming that you will get about 15% p.a. Now, 5 years from now you find that you have got 13%pa CAGR. Not a bad rate, but less than what we thought you will get. Just increase the SIP amount – you will be doing Rs. 7000 per month thanks to the top up – just increase the SIP amount to Rs. 8000. THAT IS WHAT YOU CAN CONTROL. You can’t control the return that you are getting. However you can keep increasing the amount. Maybe it will require some sacrifice. Maybe your wife will also start contributing to the same goal. Just start. That is important.

Remember Start Early, Invest wisely, and Reach your destination. This is exactly how you drive, eat, invest….the basics do not change!!

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  1. sir I started disagreeing from 1st para itself.. no offence, just healthy counter-argument…

    24 yr old – 4L is the “earning” and not “expenditure”… even if it is taken as expenditure, when this guy has a family, it can be increased by 50% to 6L (rent, electricity, large grocery etc remains common)… at 43 (18yrs later) how can 6L become 30L?? that’s like saying expense is doubling every 3yrs?? That means an inflation rate of 24% for next 18-years consecutively !!!!!!

    if the whole purpose of such stories is to scare away normal investors, then I am sorry but I have to strongly disagree….

  2. The best advise would be to try to become a Mark Zuckerberg or the Flipkart Bansals. They could retire at 35.

  3. @Mohit: For an upper middle class household in a metro, raising two children itself will cost at least 6-7 Lacs per annum (school fee, tuitions, extracurriculars, commute, apparels, toys, entertainment etc). Add to it the housing (rent/EMI), society maintenance charges, groceries, household help, healthcare, parents, car EMI, petrol expenditure, furniture, gadgets & household appliances, insurance premiums and so on…the annual expenditure will easily exceed 20-25 Lacs when the said person is in his early 40s.

    FYI, 14 yrs back, when I was 26, my annual expenditure was hardly Rs 70-80k (apart from the shared dormitory like free accommodation provided by my employer)

  4. @Kalyan, that upper middle class household spends 25 Lacs bcoz they earn 45 Lacs. That does not mean another household earning 15 Lacs per annum will also spend that much. Well they need to borrow to do that.
    In India there is still room for people with lower income, just that they wont go to 5 star hotel for dinner, wont buy German imported furniture and cars, wont send kids to international schools paying 5Lacs fee, wont go for a foreign vacation every year.
    I think the latter group is more in number than the former in India.
    And if you want to spend 25 Lacs a year, you better earn 40 Lacs annually because no amount of investing will help you to realise that spending.
    Clearly earnings will dictate spending habits.

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