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!!