Retire Early: Have kids??
Most of us can retire at 60. Well we must retire at 60. However anybody whom I meet wants to retire early. Maybe they want to retire at 50 or 45.
I don’t understand this. You get married at 33. Your kid is born at 38, and you want to retire at 50? How can this happen?
If you have one or two kids in high school – and planning to go to Ivy school..how the hell are you going to retire at 50?
Get real folks. It is early retirement or kids. Pick your choice. Both can’t happen. Especially if you have become a parent at the young age of 39 or later. If you want your kid to go an Ivy league school as of today the cost is Rs. 200L. This includes making your application, and sending it to say 4 colleges.
Face it. Kids are expensive. Tennis classes, swimming pool charges, cricket kit, music classes…..YOU NEED CURRENT INCOME TO BRING UP A KID. Retiring early without kids looks like eating chocolates! Suddenly you find the rationale why so many of today’s youngsters choose not to have kids. It is great if one spouse continues to keep working. One thing you can do is to convince your spouse to keep working till she / he is 90!
When you sit and work out your retirement expenses…you would have used some short cuts too. Of course you can retire at 50 as long as you have provided for the kids education, your parents old age expenses, and your own old age expenses. This looks tough unless you got some amazing esops, company did well, and you held on to the shares long enough to make money.
Having one spouse working when the other takes on early retirement makes sense. If your wife is earning a decent salary and has medical cover for the family – including both sets of parents, it is a great relief, is it not? And the stay at home spouse can take care of many things and ensure that the working spouse is under lesser stress.
One more thing you can do is to live like a monk. I know some people who can do it, and ENJOY simplicity. Many of us who live like a monk in some aspects may have some other non-Monk expenses. For example you may not be eating out, but your travels could be to exotic locations, and air travel prices are not likely to drop further!
It is all about priorities. Working spouse or joint treks, runs, cycling…Kids or early retirement, working hard vs taking care of your health, eating right vs eating poorly.
Life is all about choices….
Minal Ghorpade
Me and my husband married at 22,27 ,kid at 23, husband retired at 50 , all responsibilities completed single handedly, son is earning great , and he is fully independent, we are enjoying retirement, in our own home , living life of upper middle class , not like monk
Nothing is impossible,if you have planned well from.beginning
Suhas
Another awesome practical post sir… __/\__
Pradeep
If one married at only 33 and had kid at only 38, then he has has 10 years as bachelor and 5 years as a couple to make their savings. And we know all about starting to invest very early isn’t it? So retiring at 50 is possible if you had done your 1st investment 27 years ago.
SS
@Pradeep, @Minal, What is the total retirement corpus at 50 as per your calculation and that the calendar year @50 when it is achieved ?
Pradeep
@SS, A very simple calculation of investing 10,000 every month for 27 years at 10% CAGR gives a corpus of 1.5 crores.
If you step it up every year by 10% which is very likely, it gives me 4.1 crores at 10% CAGR.
Not a bad number. Other expenses will need separate investments which is definitely possible.
SS
@Pradeep, Yes Thank you, your calculation for a target of 4.1 Cr looks certainly achievable in excel if one were to ignore unforeseen/abnormal expenses. You haven’t mentioned the calendar year by which the 27 years will complete. This is important because, inflation adjusted expenses at the end of 27th year and from that time will start eating into the 4.1 Cr (as you have retired). when we drag the excel cells further down, we need to find out how long this corpus can last.
pradeep
My investment of 10k a year would have started by 2010. So we are looking at 2037 as 50 years. Remember there are 10 bachelor years during which there is scope for higher investment than just a 10% increase every year especially if you change jobs. So the 4 crore can be much higher in the end. Another important corpus is the EPF accumulation which can add another 1.5-2 crores. Finally there will be an govt pension from EPS which could start at 50 if you want or you could wait till 58.
When we do theoretical calculations, we must stick to excel. It does show it is possible to retire at 50. Exceptional circumstances may result incompletely different scenarios though.
SS
Hi Pradeep. Agree with your calculations. Consider this: If you spend ~50 K pm towards Household & other expenses today in 2019, it is 6L PA. For now you do not bother about expenses as you are working till 50 and it is taken care of. Working towards 2037 as you mentioned, the expenses will grow to 6L PA x (1.08^19) assuming modest 8% inflation. it works out to be 24 LPA in 2037. This will be consumed from the corpus of 4 Cr. Assuming that, inflation and bank interest returns mutually cancel out each other, the 24 LPA will exhaust the 4 Cr in about 16 years. i.e in 2053 at the age of 66. If you have a spare 1-2 Cr, it will pull on till 70-74. I have stuck to excel, as it is just theory. What do you think?
Pradeep
Well EPS pays 7500 as max per month which covers 15% of the 50k expense. So my corpus won’t shrink as fast as your calculation shows. So I would think I might be covered until 80. Also the return calculation uses a modest 10% returns for 27 years. Even a .5% more will give me plenty. Anyway I am comfortable to take 30 years corpus at 50 years old. We as humans are tuned to adapt, so if you are running low on money at 70years old, you will not live to destroy yourself.
Minal Ghorpade
We have already retired with 2.5cr corpus ,consuming from 2018 ,one flat with is on rent , and one bungalow, where we live in good locality in pune , now both in good health without any problem
Minal
We can’t do any thing now , so let’s hope for best
SS
Hi Pradeep, 7500 and 50 Kpm expense is for ‘TODAY’s monthly expense’ in 2019. Not for 2037. Pls inflation adjust the expenses to 2037 and check (I got 24LPA for 2037). Also we dont have to settle with a 0.5 increase. I can put whatever numbers I like in excel sheet. For eg. I could assume 18% on my investments instead of 10% or 10.5%. But it makes no sense.. Pls note: this is not an argument to justify your numbers or my numbers. Just discussing possibilities that is all.
Hi Minal, Thanks for sharing this info, your numbers 2.5Cr look great imho. if you were to “just” take the modest 6% interest off the bank, it yeilds 15L PA on 2.5Cr + you have HRent income. If we go by 6LPA as yly expenses in Pune, it gives sufficient cushion to live and reinvest the surplus 6L-7L (i.e Tax reduced surplus) in equity for further extended time w/o touching the principal for a short while atleast. HRents will inflation adjust and keep the money flow ticking. Besides your son is earning and major responsibility is over.
it is a contrast of nos; with same nos. Minal NW 2.5c+1.5c(house)=4cr which you have right now in 2018, is not the same as 4cr NW in 2037. (ignoring unforeseen expenses) . It is just my thoughts only.. I could be right/wrong, we are all trying to learn stuff from Subra sir’s blog.
Pradeep
EPS was only giving 3000 Rs as max pension until 4 years ago. Now it’s 7500. So why would you think it will remain 7500 even in 2037?
In your book expense will go higher due to inflation but no increase in EPS pension?
Today inflation is only 4%, why do you think it will be 8% for 30 years from 2037?
Why do you think inflation of 8% will compensate the 10% returns post retirement?
India’s life expectancy is not even 70, then why you want to count to 80?
You want to put aggressive estimates for inflation, life expectancy but return expectations should be very moderate?
At this rate, you won’t want to retire at 60 with 25 crores in the account.
Please understand at the age of 70, you won’t go to pizza shops, multiplexes, BBQ nation, bowling alleys, etc which you do now that makes your expenses 50k.
Also if your expenses is 50k today with your kids, it will not be the case when your kid has started earning.
Keep all these exorbitant assumptions away and think realistically what you could do at 65-70
years old. All that Subra talks about exotic vacations, you think how many times you have gone in your past few years. It’s only applicable for those high earning businessmen who spend money like water today. Not those who earn 1 lac and invest 50k after expenses and taxes.