We discuss how to create a resilient investment strategy for retirement. This requires the following: (1) A large cash buffer for emergencies, (2) A guaranteed income source that handles partial expenses for the entire duration of retirement (also known as an income floor) or guaranteed income that increases at a rate close to inflation for the…

Chandran is 30 and salaried and hopes to retire by 55. In this case study, we shall find out how he can plan for financial freedom in retirement.  That is, we shall find out how Chandran can derive an inflation-protected income and be financially free after retirement. What is inflation-protected income? A retirement income that…

An ideal retirement portfolio should (1) generate an income that will keep pace with inflation and (2) have some buffer in the corpus to handle unexpected expenses (recurring or one-time). Here are the elements of an ideal retirement portfolio. 1. Pension: This is a prominent and important component. Also known as income flooring. This will…

A reader asks, “What is the corpus required to retire in 2026 at age 55 with monthly expenses of about Rs. 1 lakhs?” We shall use the freefincal robo advisor tool for this exercise. The retirement corpus is assumed to be invested in five buckets. Please note that the numbers provided below represent an example….

Many people make two mistakes while planning their finances. The first common mistake is presuming that equity mutual funds provide a 12%  (or more!) return and utilising that figure to calculate the necessary investment amount. Regrettably, this approach entirely disregards asset allocation and the reality that investing 100% in equity is not feasible. Even those…

30X refers to the retirement corpus that is thirty times a person’s current annual expenses (X). 25X, 45X, etc., are all corresponding multiples of X. What does 30X mean in retirement planning? Suppose my current annual expenses are Rs. 12 lakhs. I expect inflation after retirement to be about 6%. I expect the post-tax return…

A 28 year old reader wants to retire by 50. Can he do so? Let us do the calculation using the freefincal robo advisory tool with the following assumptions (remaining assumptions stay the same): Monthly expenses Rs. 50,000; Post-tax return expected from equity investments % 10.00 Post-tax return expected from current taxable fixed income %…

There is more to retirement planning than determining if the corpus is large enough to handle inflation! Financial independence and, therefore, the ability to retire early is not an end. It is the means to consider options from a position of comfort and security.  Therfore, anyone wanting to quit salaried existence early must have a…

We discuss thumb rules to judge retirement corpus health using safe withdrawal rates (SWR). This discussion also answers broader questions like, ‘When can a retiree take risks after retirement?’ and ‘How much equity exposure can I have after retirement?’ Note:  In this day and age, using a proper retirement calculator only takes a few minutes. So,…

A reader asks, “I am 27 years old. My current monthly expenses are about Rs. 30,000. I don’t intend to get married. Can I achieve financial independence at 40 if my net worth today is zero?” Let us determine what the freefincal robo advisor tool coughs up for this scenario. The assumptions and inputs are…

A reader says, “This concerns the required retirement corpus and whether I am on the right track. I am 32 years old, my spouse is 26, and both are working (private jobs and no job security). I wish to retire by age 45. How should I plan, and what is the corpus required?” “Current retirement…

Readers often ask us if there is any ideal equity exposure after retirement. This is a tough question to answer as it depends on the individual, but some general guidelines or thumb rules are possible. Asking this question on the verge of retirement without prior market experience can be harmful. It is essential to ask…

Many readers often ask, Is 35 too late for proper retirement planning? Assuming retirement is 55, there is a good chance of accumulating enough corpus for retirement. If necessary, one can consider an extension up to age 60. Let us answer this using the freefincal robo advisory tool. Current monthly expenses that will persist in retirement…

While preparing a slide deck for a talk at the Reserve Bank Staff College, I made a bespoke retirement calculator that factors in an indexed pension. Here is how that makes a huge difference to a retirement plan. An indexed pension increases each year at a set rate or inflation rate. This is known as dearness…

In a recent talk, a person nearing retirement asked me to explain the differences between RBI Retail Direct Bonds and RBI Floating Rate Bonds. RBI Floating Rate Bonds have a seven-year duration and a variable interest rate reset every six months. Its return is fixed at the prevailing NSC rate plus 0.35%. It provides interest…