Can I retire with Rs. One Crore at age 40?

Published: January 1, 2022 at 7:00 am

A reader asks, “I am 39 yrs old. I am planning to take early retirement in the next 15 months. I have a savings corpus of 1 Cr INR. My monthly requirement is 50 K INR. I need help with two things: 1) advice if this can be done  and 2) If yes, then investment guidance to achieve it (how can I invest this big amount with safety)”

While regular readers may know the answer to this, what follows is a simple explanation for beginners. First of all, it is important to appreciate that retirement planning is a complex problem and requires extensive introspection and DIY research or professional advice from a SEBI registered fee-only financial planner. Scanty information such as the above may be enough to write a cautionary article such as this but is not good enough to offer personalized investment advice.

The reader must first appreciate two important aspects of retirement planning. The monthly amount we require after retirement is, in reality, the monthly amount required in the first year of retirement. We need to increase this income by at least 5-6% each year to keep pace with inflation.

If income increases each year, we cannot lock all our money away in safe assets. Yes, a good chunk of it will be used to receive a regular income, but a portion has to be invested to provide the higher income. So “investing with safety” is an oxymoron if you want the principal to be undisturbed.

At age 40, an annuity plan at 6% interest (before tax) that provides a monthly pension of Rs. 50,000 (before tax) is just about possible. However, we will not be able to accommodate even a small increase in regular expenses. Emergencies, particularly those related to health, can be an even bigger problem. The annual premium of a comprehensive health cover must be considered while planning for retirement. Note that this refers to the premium after retirement. So the current premium should be suitably inflated by at least 10% each year.


So let us now see what the corpus required for retiring at 40 is. Trivia: it will be lower than the corpus required for someone who wants to retire 20Y from now age 60! See: Retire early to lower your retirement corpus!

We shall use the freefincal robo advisory tool for this illustration.

Assumptions:

  • Time to retirement: 1Y
  • Age of retirement: 40
  • Years in retirement: 45
  • Inflation after retirement: 5% (we recommend using at least 6%; 8% is even better, but let us first roll with 5%)

Corpus Required:  Rs. 1.7 Crores with 70% in fixed income and 30% in equity (overall) split into four baskets: income, low risk, medium risk and high risk. About 5% of the fixed income will also be allocated to an emergency bucket to handle contingencies. For example, see: I am 30 and wish to retire by 50; how should I plan my investments?

  • If the inflation is set to 6%, the corpus increases to Rs. 1.95 Crores.
  • Rs. 2.33 Crores with 7% inflation.
  • Rs. 2.83 Crores with 8% inflation
  • The recommended equity allocation will increase from 30% to 40% as inflation increases from 5% to 8%.

In summary, we think that Rs 1 crore is not enough to draw Rs. 50,000 a month and keep pace with inflation after retirement at 40. We recommend a corpus of at least Rs. 2.5 to 3 crores. In addition to monthly expenses, we should remember to buy a large insurance policy and include the future premium in the calculation.

It is important to appreciate that “early retirement” only means retirement from a salaried existence (as an employee). Only those who have established a strong secondary income source – passive or active (full time or part-time) should consider early retirement. Even if scanty and irregular, any income after retirement can make a difference to our financial independence.

Do share if you found this useful

About The Author

Pattabiraman editor freefincalDr 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 nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice.
Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 800 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 2700 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 what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 620 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 who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
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 their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps