Retirement Calculators….
Sorry this is a favorite topic…and no I do not have a calculator.
I keep saying that if you are about 40 years of age, you need a MILLION DOLLARS for you to retire. I still stick my neck out on that. However just saw some interesting stats. There are about 7 billion people on the planet. About 12 million of them are millionaires (US $ denominated). That means an awful lot of people are going to retire with a lot less money than what I am predicting. Or is it? I am talking of 1 Million $ only AFTER 20 years, not today!
1. When I say US dollar 1 million, I mean this has to be your NET WORTH. This is Assets minus liabilities should be 1 million US $.
2. This assumes that you have no pensions, annuity, royalty….income. If you have one of those, your requirement falls.
3. Your cost of living, health care costs, and your ability to alter your life style based on the amount of money available. If you are the watch tv and sleep more type of a retiree, you will need less than the travelling type of a couple.
4. The surplus that your kids have – just in case you need to fall back on! It gives a lot of comfort to know that your kids ARE in a position to support you – YOU may not use it, but just that comfort is useful. It is therapeutic.
5. The age at which you retire – I hope to be dying with my boots on. So if you can earn – long enough post your retirement, that is likely to reduce the need for a US $ 1 million.
but hey….look at your own portfolio – you need protection from one big enemy.
The joker whose face you see while shaving 🙂 assuming of course that you are not a barber.
SR
>>if you are about 40 years of age, you need a MILLION DOLLARS for you to retire.
some clarification please,
if you are about 40 years of age, you need a MILLION DOLLARS for you to retire as in retire right now at the age 40?
or does this mean, if you are 40 (and in another 20 years) if you retire make sure you have 1 million = by the time you are 60?
Thanks
subra
yes it is for retiring at 60. If you retire AT 40 you might require MORE than 1 m $. You will have to add another say Rs. 2 crore for this period…
Naveen Sharda
Article about – Sushil Kumar, KBC winner “Fickle fame: The ‘jobless’ KBC winner with little cash” – http://www.hindustantimes.com/india-news/fickle-fame-the-jobless-kbc-winner-with-little-cash/article1-1313778.aspx
Reading your blog for past 3 years and first thing while reading above article I remembered was your following article –
http://www.subramoney.com/2011/11/sushil-kumars-rs-5-crores/
Unfortunately, its so accurate
moronbuffett
assume = ASS U ME
assumptions make an ass out of you and me.
can you please list out all the implicit assumptions made in quoting this figure ?
thanks
Swapnil
If I assume 8 % inflation, one million USD of 2035 is equivalent to 1.3 crores of today (assuming a constant dollar rupee rate).
Does that mean for 60 year old person retiring today, 1.3 crores rupees are enough?
My guess we will need more than one million USD (if we have the same high inflation era as what we had for the past 30 years).
A person with annual expenses of 6 lakhs today will have about 40 lakhs expenses by 2035. One million USD at that time will be only 15 times the annual expenses.
subra
a 60 year old retiring today will need about 40 years expenses – there are many ways of calculating retirement expenses…so if his expenses are about Rs. 6L…he will need about Rs. 2.4 crores.
Please note this does not include buying of a HOUSE while keeping the existing house.
subra
thanks Naveen Sharda…u will see it as a separate post…
moronbuffett
“a personal finance blogger with a spreadsheet causes more harm for generations than an atom bomb” – einstein’s grave
these questions should help in arriving at the decision. Each person’s situation and expectation is different. here goes.
1.WHEN – 1,3,5,10,15,30 yrs from now?
2.WHERE – heart of city,village,tier 1,2,3
– own house or children’s house
– old age home
– assisted living with nurses
3.WHO – living with spouse (2ppl) alone or with your kids + their kids?
4.WHAT – current health issues
– current cost of living
– life expectancy based on family history
– current hobbies and associated costs (smoking, club memberships etc)
– children (mainly daughters) wedding expenses
– cost of children education (ug/pg)
5. HOW MUCH — Address the WHY for every answer or decision for above 4 interlinked points you should have a reasonable estimate!
moronbuffett
Contd…
So for example, if i do the exercise for myself
I plan to retire in next 15 years, buy a house in my ancestral village, living with my spouse + couple of relatives nearby.
my only major expense will be my daughter’s wedding. I dont intend to sponsor my son’s education or wedding.
I expect to live max 15 yrs in retirement. we currently dont have any health issues.
so all put together based on current cost of living, assuming 8% inflation, i need 1Cr + 0.5Cr (for house) INR when i retire.
QED
Ravi
@moronbuffett Do you have your own blog? Please share the link!!
I feel your way of thinking is different than Subra sir, have you seen early retirement(Financial Independence) blogs like http://www.mrmoneymustache.com/ ?
At the end of the day i feel it’s better to increase your knowledge – i really appreciate Subra sir for sharing his knowledge. It’s up to us to decide what applies to our specific case and the assumptions which apply to us, we can definitely disagree!
Ravi
@moronbuffett Do you have your own blog? Please share the link!!
I feel your way of thinking is different than Subra sir, at the end of the day i feel it’s better to increase our knowledge – i really appreciate Subra sir for sharing his knowledge. It’s up to us to decide what applies to our specific case and the assumptions which apply to us, we can definitely disagree!
Rajeev
If you do not have an inflation adjusted income, like rent or govt pension, then it is very tough.
You have to invest in a mix of options whereby you get a return that is above inflation. And also spend only that portion of income which is above rate of inflation, for the first 10 years or so of your retired life. This will protect your capital
What it means is that if you earn 11% on your investments and inflation is 8% then your annual expenses have to be less than or equal to 3% of your investment value.
After 10 years, you can start spending more, and thereby reduce your capital.
You then hope you will die before your money runs out. Or you do not have medical surprises.
I agree with most of Subra’s views.
Rajeev
It is a given thing that to earn more than inflation, you have to be in equity. I personally would like to play with direct stocks just for the pleasure it gives and to keep nerve cells working. MF route is for bulk of the equity portfolio.