A checklist and calculator for early retirement in India

Here is a calculator and a checklist to consider if you wish to retire early in India.  When I earlier asked “Is it possible to retire early in India?“, many readers assumed that I meant early retirement is not possible in India.  All I wanted to convey was that excessive portfolio volatility is not the answer to combat the high inflation in India.

I followed that post with a friendlier illustration on “How much do I need to retire early in India?“. The message was still the same: when it comes to retirement, safety first! However, this was perceived more positively.

Now I would like to discuss a simple checklist which  might help readers assess their preparedness for early retirement. The calculator is based on the above illustration.

What is early retirement?

It simply refers to cessation of regular employment. The person could still earn from consultancy (part-time or full-time) or by other means, but that income is considered temporary and is not included in the retirement plan. That is, we are financially in a position to work if and when we please.

Retirement planning is counterintuitive! Very few realise that earlier we retire, lower our retirement corpus! So planning for early retirement with a ‘low’ corpus could well be easier than planning for normal retirement with a ‘low’ corpus (more on this later).

Before we look at the checklist, some dont’s:

  1. Get rid of the notion of a “safe withdrawal rate”.  If you must use the idea of a withdrawal rate, replace ‘safe’ by ‘initial’. Use this calculator to see why I say so: What Should Be Your Retirement Withdrawal Rate?
  2. Recognise the importance of “sequence of returns”. A few bad years in the stock market can destroy a retirement portfolio. I have the had the privilege of studying some robust early retirement portfolios and the equity component has never exceeded 50%.
  3. Even after you retire (early), you need to review the portfolio each year and determine if you can afford to stay retired.

If you wish to retire early, here are some tools that might help

Understand the corpus accumulation process:

Step 1: The low-stress retirement calculator (hopefully!)

Step 2: The even lower stress retirement calculator!

Step 3: Low-stress retirement calculator with flexible asset allocation  (advanced version of step 1. If you want me to add this feature to step 2, leave a comment)

Step 4: Stress Test Your Retirement Plan

Understand the corpus management process:

Step 1: Generating an inflation-protected income with a lump sum

Step 2: Illustration: Generating inflation-protected post-retirement income

Step 3: Inflation-protected Income Simulator

Step 4:  Try out the game: Retirement 'Bucket Strategy' Simulator

A checklist for early retirement in India 

(perhaps anywhere!)

  1. Do I have an emergency fund which is at least equal to 12 months expenses, preferably 24 months? A part of it should be liquid and a part of it should grow in perhaps a ultra-short term debt fund for future use.  The health of this fund should be reviewed each year.
  2. Do I have a health insurance cover for all my family members, be they dependents or not. Preferably an individual health cover for each.
  3. Do I need to continue my term life insurance cover after I retire? I think early retirees should continue and let the policy run its course, especially if it is an online policy.
  4. Do I have enough money (call this C1) to allocate to fixed income assets so that I can receive an inflation-protected income for at least the first 15 years of retirement (years 1-15: called the first segment in the calculator).
  5. Do I have enough money (call this C2) to invest in a reasonably aggressive portfolio (not 100% equity) so as to generate a corpus with which I can receive inflation-protected income for the next 15 years of retirement (years 16-30: called the second segment in the calculator)
  6. Do I have enough money (call this C3) to invest in a reasonably aggressive portfolio so as to generate a corpus with which I can receive inflation-protected income for the last 15 years of retirement (years 31-45: called the third segment in the calculator)
    • Total corpus required for early retirement = C1 + C2+ C3.  Use the calculator (link below) to play around with this. I have used 10% as the portfolio return for the growth of C2 and C3. This is not offered an input, but you can change it yourself easily.
    • This is just an illustration. An alternative but similar illustration can be found here: “How much do I need to retire early in India?
  7. Have I used reasonable inputs for expenses, inflation and return in the calculator?
  8. Do I know what I am going to do after quitting my regular job?
  9. Do I know how I am going to use any part time income that I might generate?
  10. If I am going to travel or use funds for expensive hobbies, do I have a budget and a separate corpus or source for the same?
  11. Does my early retirement plan depend on my frugality? Do I understand that frugality is a luxury?! We may want to be frugal, but life should let us.
  12. Do I understand that life is uncertain, will not pan out like it does on an Excel sheet and that the best plans can go awry in an instant?

What do you think? Have I missed out anything?

Early retirement calculator

Here is a screenshot.


Download the early retirement calculator

Updated: Thanks to feedback from Atul.

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18 thoughts on “A checklist and calculator for early retirement in India

  1. DR Rajnikant V Gajjar

    Resp Pattu Sir
    Your post today ( A checklist and calculator for early retirement in India) & calculator included with it (Download the early retirement calculator) is one of the simplest & one of the most comprehensive one in field of personal finance.
    I am ready to challenge if someone goes thru.this post & its relevant links ,one does not need to know anything more,at least so far as retirement & financial freedom issues in personal finance are concerned.
    I really appreciate the common sense wisdom that is the BENCHMARK of your posts.
    Excellent job done.
    For readers,do not miss this post.
    It is something that can act as LIGHT HOUSE for you in field of personal finance.
    Wish you all, ALL THE BEST

  2. Satish

    Hi ,
    I think you have been making the calculation of retirement requirements progressively simpler and simpler. to really make this simple and as a starting point at least, can you come up with a chart , give it your name ..which shows that if your monthly spending is x (say 40000 p.m) and you have y years to live after retirement, you would need to have z as a lumpsum when you take the retirement leap.
    Monthly expenditure 30000

    Years of existence after retirement
    Differential savings rate
    20 25 30 40 50 60
    -3% 5Cr 6Cr 7Cr 8Cr
    -2% 4Cr
    -1.50% 3Cr
    -1% 2Cr

  3. lakshminarasimman

    if you have children forget early retirement in india.
    early retirement is a fantasy of people trying to do in their 40s what they did not or could not do in their 20s and 30s
    best way is to go abroad get a job, live there for 15-20 years and come back.

      1. B

        on the lighter side...they would remain retiree only until their children are school going..:(...when they pass out of college....and not settle in life and treat their fathers as ATM....these retirees will have to take up jobs again.....

    1. A.Sundaram

      Sorry to differ.I retired at the age of 47(have not earned a single penny after that for 12 years through any active income).At that time,my elder daughter was aged 17 years(in early years of College) and my second daughter was aged 9 years(in school).My elder daughter will complete her Ph.D. in USA this year and my younger one,God Willing,would go abroad for her Masters' study this year.And just to clarify,I did not get any inheritance or win a lottery.But,yes,I was lucky to be at the right place at the right time 🙂

      Posting this to just give a different perspective.

  4. Satish

    Hi Pattu,
    I think there is an error in your PV calculation. you cannot take the pv by ((1+interest)/(1+inflation))-1. so if interest rate is 6% and inflation is 7%, pv rate cannot be ((1.06)/1.07)-1) . i have tried this using a manual method..and get slightly different results. i dont know how to send you the excel but if i assume as follows
    monthly:- 100,000
    inflation:- 7.2% (roughly prices double every 10 years)
    interest:- 6% (this is what an 8.5% fd would give after tax)
    number of years :- 10
    as per your calculator i get the answer :- 12,630,146

    however if we go year by year the answer comes to :- 11,915,232
    An error of 6%. happily on the overestimation side. but still an error.

    here are my manual figures..for 10 years intial step.

    Initial Capital Interest rate Inflation rate Annual expenses

    11,915,232 6% 7% 1200000

    Year Expenses Interest earned Capital at end of year
    1 1200000 714914 11430146
    2 1286400 685809 10829554
    3 1379021 649773 10100307
    4 1478310 606018 9228015
    5 1584749 553681 8196947
    6 1698851 491817 6989913
    7 1821168 419395 5588140
    8 1952292 335288 3971137
    9 2092857 238268 2116548
    10 2243543 126993 -1


    1. freefincal

      1) the rate function in PV can be +ve or -ve
      2) (1+interest)/(1+inflation))-1 is the real rate of return and the corpus arrived at (126,30,146) seems fine to me
      Years Mon Expenses Year start Corpus Year-end Corpus
      1 1,00,000 126,30,146 121,15,955
      2 1,07,200 121,15,955 114,79,328
      3 1,14,918 114,79,328 107,06,326
      4 1,23,193 107,06,326 97,81,697
      5 1,32,062 97,81,697 86,88,765
      6 1,41,571 86,88,765 74,09,309
      7 1,51,764 74,09,309 59,23,430
      8 1,62,691 59,23,430 42,09,406
      9 1,74,405 42,09,406 22,43,543
      10 1,86,962 22,43,543 -0

  5. Satish

    that is interesting. i still get a different value. i am taking inflation at 7.2% and interest earned as 6%.

    Interest after tax 6
    Inflation 7.2
    Years Mon Expenses Year start Corpus Interest earned Yearly expenses Year End Corpus
    1 100000 12630146 757809 1200000 12187955
    2 107200 12187955 731277 1286400 11632832
    3 114918 11632832 697970 1379021 10951781
    4 123193 10951781 657107 1478310 10130578
    5 132062 10130578 607835 1584749 9153664
    6 141571 9153664 549220 1698851 8004033
    7 151764 8004033 480242 1821168 6663107
    8 162691 6663107 399786 1952292 5110602
    9 174405 5110602 306636 2092857 3324381
    10 186962 3324381 199463 2243543 1280301
    11 200423 1280301 76818 2405078 -1047958

  6. Satish

    only after doing a solver on the above i get the correct value. guide me...where am i going wrong. my whole retirement planning depends on this.

    Interest after tax 6
    Inflation 7.2
    Years Mon Expenses Year start Corpus Interest earned Yearly expenses Year End Corpus
    1 100000 11915232 714914 1200000 11430146
    2 107200 11430146 685809 1286400 10829555
    3 114918 10829555 649773 1379021 10100308
    4 123193 10100308 606018 1478310 9228016
    5 132062 9228016 553681 1584749 8196948
    6 141571 8196948 491817 1698851 6989914
    7 151764 6989914 419395 1821168 5588142
    8 162691 5588142 335288 1952292 3971138
    9 174405 3971138 238268 2092857 2116550
    10 186962 2116550 126993 2243543 0

  7. Satish

    our corpus at end of year is different for same assumptions...

    year end corpus for me = year start corpus (12630146) + interest earned (757809) - expenses (1200000) = 12187955

    how do you get = 12187955

  8. Satish

    i mean how do you get year end corpus at end of first year = 121,15,955
    i am getting = 12187955

    year end corpus for me = year start corpus (12630146) + interest earned (757809) - expenses (1200000) = 12187955

    the earlier post was a typo. your help would be great.

    1. freefincal

      It is =(12630146-1200000)*(1+6%) =121,15,955

      The 12L is withdrawn before 6% return is earned at the end of year 1. The way you have described represents end of year withdrawals. Which means first year in retirement is not supported.

  9. lakshminarasimman

    sundaram and pattu sir very happy to know there are early retirement success in india
    can you share how it was achieved
    did you stay abroad
    i guess your daughters education will be scholarship for phd and masters in us

    1. A.Sundaram

      1) I have never gone outside India-even for a vacation.
      2) The Masters' program was fully funded by me-including the living expenses(I did not want my daughter to avail of an education loan and carry a millstone around her neck).But for her Ph.D. she has received full scholarship and she has staunchly refused to take even a rupee from me-for her education or otherwise.
      3) I had narrated the full story of my financial journey from rags to FI in one of the threads in AIFW some time back(it was quite a long post with hundreds of follow-up comments and clarifications).In short,I was lucky to get an opportunity like 1991 when the Indian economy chose to open up and I used the capital market to achieve my goal.

      1. Chaitanya

        Hello A. Sudaram, Could you post those details please? I tried to search on this website about your post. Would love to know how did you achieve this? Unless I guess cost of education is manageable early retirement with normal salary range is out of question.

        1. A.Sundaram

          You will not get my post in Freefincal since it was in AIFW-that,too,some time back.As I have already mentioned earlier,it was through active investment in the stock market.The cost of foreign education was indeed very costly but by God's Grace,could provide for it.


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