A reader asks, “I am 38 years old, currently have a corpus of 2.25 Cr. 70% is in debt { SCSS (30), EPF (25), PPF (25), Arbitrage Funds (70), Debt MF (rest) } and 30% in equity MF. I invested in arbitrage funds as they provide good returns (vs FD) and a means to balance my portfolio easily”.
“Is the corpus enough to retire? What would be the bucket strategy you would suggest with the below assumptions?”
- Monthly expenses (40k) + 1 lacs annual expenses
- Not married, so the corpus should last till I am 85
- Already have health insurance of 10 lacs + super top-up of 50 lacs
- Emergency corpus of 12X Monthly expenses already saved separately
- I have my own house. My parents are not dependent on me
- I plan to do odd jobs till I am 60 to manage any other expenses.
- I have a high-risk appetite, so I’m not looking at annuity options.
The reader also shared his investment journey briefly. This will be published in a subsequent article. We shall enter his numbers into the freefincal robo-advisory tool and see what comes out.
The short answer is yes, you can afford to retire with 2.25 Crores, but there are many uncertainties involved as the retirement tenure is so large. So we strongly recommend that you continue to work on something you love and manage your expenses. This will allow your corpus to grow untouched and reduce the risk of outliving it.
If readers are surprised by this answer, then we suggest reading this: Retire early to lower your retirement corpus! The earlier the retirement, the lower the corpus required!
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The robo tool divides the retirement corpus into five buckets. That is, the retirement corpus will be divided into five parts. This is only one of many ways to construct a bucket strategy. The idea here is to minimise active management and shift funds from one bucket to another unless necessary. The following assumes 52 years in retirement (until age 90). The percentages are specific to the set of inputs and should not be used by everyone.
- An emergency bucket to handle unexpected expenses. Example: 5%. This is already separately available.
- Total equity allocation: 35% (excluding the emergency bucket). Please note that early retirement does not mean more equity allocation! That will be too risky. Since the reader does not want to work regularly, we must be conservative.
- An Income bucket (46%) for guaranteed income for the first 15 years of retirement. During this time, investments are made in the following three buckets.
- Corpus is from a low-risk bucket (30%) that provides retirement income from year 16 to year 28. To provide this income, the low-risk bucket will have an asset allocation of 50% equity and 50% debt during the investment period (years 1 to 15 of retirement).
- Corpus from a medium-risk bucket (14%) will provide retirement income from years 29 to 38. To provide this income, this bucket shall have an asset allocation of 70% equity and 30% debt during the investment period (year 1 to year 28).
- Corpus from a high-risk bucket (10%) will provide retirement income from years 39 to 52. To provide this income, this bucket shall have an asset allocation of 100% equity and 0% debt during the investment period (year 1 to year 38).
- After 15 years, the low-risk bucket will be turned into 100% debt and provide income for about 13 years. After that, the other buckets will also be progressively used. One can always customize this usage after retirement.
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🔥Join our community of 9000+ users! 🔥 Use our Robo-advisory Tool to create a complete financial plan! More than 3,500 investors and advisors use this! Use the discount code robo25 for 20% off. Plan your retirement (early, normal, before, and after), plus non-recurring financial goals (such as child education) and recurring financial goals (such as holidays and appliance purchases). The tool helps anyone aged 18 to 80 plan for retirement, plus six non-recurring and four recurring financial goals, with a detailed cash flow summary. Our Flagship Course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market conditions! Watch the first lecture for free! One-time payment! No recurring fees! Lifelong access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence. Join the freefincal investor circle! An exclusive space for investors, advisors, fintech employees and students to access financial planning and insurance tools, mutual fund and stock analysis tools, coding strategies and Excel macros for data extraction. 750+ members are now part of our investor circle. Increase your income by getting people to pay for your skills! More than 900 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for side or passive income, we will show you how to do it by showcasing your skills and building a community that trusts and pays you. (Watch the 1st lecture for free). One-time payment! No recurring fees! Lifelong access to videos! Track your mutual funds and stock investments with our Google Sheet! We also publish monthly screeners for- Equity mutual funds
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Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
Dr M Pattabiraman giving a lecture
Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 14 years of experience publishing news analysis, research and financial product development. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice. Connect with him via Twitter(X) LinkedIn YouTube Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (Published by CNBC TV18) for DIY investors. 
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
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