A reader says, “I am a senior citizen and an investment banking professional with over three decades in the Middle East. As an NRI, who would return to India”.
“The facts:
- Am a senior citizen , aged 63, with self owned debt free houses. Will live in one of them.
- A retired life for a couple with a medium lifestyle – neither frugal nor extravagant.
- Assume a monthly exps of about Rs. 1.2 lakhs today with limited scope for eating out, entertaining, etc.
- Life expectancy – Of course a difficult question, but as you assume, say 90. BTW, my wife is 3 yrs younger than me.
- Reasonable local travel of 2 or 3 trips a year.
- What is the corpus required by me to retire today, in India ?”
I would strongly recommend that you either DIY with the freefincal robo advisor tool or seek professional advice from a SEBI registered fee-only advisor on our curated list.
What I do is to offer you a ball park estimate excluding the local travel that you have planned using the robo advisor tool.
Note: This retirement planning illustration depends on several inputs and assumptions. Not all of them are shown here. These inputs and assumptions must be changed by the individual according to their circumstances. Please do not copy these numbers for your personal use without a proper calculation.
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- Assumed life expectancy of younger spouse 90
- Inflation during retirement (%) 6
- Monthly expenses in first year of retirement 1,20,000
- Years in retirement (until younger spouse reaches age 90) 30
Note: When referring to drawing income, we assume the amount withdrawn on the first day of each year in retirement will be 6% higher than the previous year to account for inflation.
The retirement corpus is assumed to be invested in five buckets.
- An emergency bucket to handle unexpected expenses.
- An income bucket to provide guaranteed income for the first 15 years of retirement.
- During this time, investments are made in the following three buckets.
- Corpus from a low-risk bucket will provide retirement income from years 16 to 23. To provide this income, the low-risk bucket will have an asset allocation of 30% equity and 70% debt during the investment period (years 1 to 15 of retirement).
- Corpus from a medium-risk bucket will provide retirement income from years 24 to 27. To provide this income, this bucket shall have an asset allocation of 50% equity and 50% debt during the investment period (year 1 to year 26)
- Corpus from a high-risk bucket will provide retirement income from years 28 to 30. To provide this income, this bucket shall have an asset allocation of 100% equity during the investment period (year 1 to year 35)
The retirement corpus will be divided into five parts—overall asset allocation excluding the emergency bucket, 82% fixed income and 18% equity.
What is the minimum corpus required?
- A little less than Rs. 4 Crores which we shall round off as Rs. 4 Crores
- Note that this is exlcuding the local trips planned. You can use the recurring goals module in the freefincal robo advisor to plan for these separately.