I retire from the armed forces in 8 years can I be financially independent?

Published: July 17, 2022 at 6:00 am

A member of the armed forces writes, ” Hello sir, I am a continuous follower of your financial advice and financial-related methods(YouTube and web).. thankful to you for all these practical and fact-based reviews and advice”.

“Sir all of your retirement corpus planning or savings required for retirement are not mentioned whether they have a govt pension plan(OPS) included or not, I think not, because nowadays most job doesn’t have OPS,( only defence has OPS now). Sir, I want to know how much the retirement planning will change while having an OPS. Please consider my example, I am left with 8 years of service, and my total portfolio investment is 30000/month ( 12500 PF and 17500 MF), and the current value of the portfolio is 24 lac(step-up of investment mostly not possible)”.

“Approx 30000/ month will be my pension after 8 years and will get approx another 15 lac( gratuity+insurance etc, PF excluded) from service after retirement. Please review my portfolio and give your view on people like me can have early retirement or survive on their own after retirement. ( If no income is possible after retirement, as a big chunk of ex-servicemen are facing)… please consider this question for your advice and review, I and we will be thankful to you very much. Waiting for your response”.

We also found that the serviceman has about eight years to retire with about Rs. 35,000 to 40,000 of monthly expenses that will persist in retirement. Usually, we use some assumptions of return and inflation to determine the corpus and investment amount necessary.

In this case, we shall adjust the assumptions to find out what the expected corpus “can do” instead of what it “must do”. We shall use the freefincal robo advisory tool for the calculation.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

The availability of a pension can make a big difference to a retirement plan and to the retiree as their basic needs are satisfied. In this case, we shall assume that pension increases at the rate of 3% per year. The robo tool can accommodate three such pension or income sources (from rent etc.)

The goal here will be to adjust the return and inflation assumptions until the total investment required is close to the Rs. 30,000 per month mentioned above. That is we shall try to keep the return expectations as high as (reasonably) possible and inflation expectations as low as (reasonably) possible.

These inputs lead to an investment amount close to what the serviceman is currently managing each month.

  • Current age 32
  • Age of leaving the service: 40
  • Current expenses; Rs. 40,000
  • Return expected from equity (post-tax): 11%
  • Return expected from tax-free debt:  7%
  • Return expected from taxable debt (if any): 6%
  • Value of tax-free fixed income (GPF): Rs. 10 Lakhs (approx)
  • Value of equity investment: Rs. 15 lakhs (approx)
  • Lump-sum benefits expected at retirement: Rs. 15 lakhs
  • Pension: Rs. 30,000 per month increasing each year at the rate of 3%
  • The rate at which investments increase each month: 0%
  • Inflation before and after retirement: 5%

The total corpus required is about Rs. one crore and the total monthly investment required is Rs. 32,000. The future growth of current holdings is also factored here. The equity allocation required is about 60-65%.

So, can the serviceman be financially independent after retirement? “Almost” Yes. He is not in a bad place financially but he is not in a robust position either.

Without the pension, the corpus required will be close to Rs. Two crores! The monthly investment required will be close to Rs. one lakh! The govt. pension is the bedrock of the serviceman’s financial stability after retirement. This is known as income flooring. Also see: Creating the “ideal” retirement plan with income flooring!

In summary, we recommend that the serviceman immediately start planning for his future. The pension will cover his basic needs and his corpus will take care of the remaining expenses for some time in retirement. It is easy for us to say it but it is important to start thinking about a second career asap so there is enough time to plan and prepare mentally (especially since he says income post-retirement is typically hard).

At 40, he has age by his side. He must find a way to use his existing or newly acquired skills and earn an additional source of income. This will ensure the corpus from current investments remains untouched for as long as possible.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

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 ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), 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 promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 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 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 700 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 and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We 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, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? 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 parents plan for it, as well as teaching 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 is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. 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 with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will 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 and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
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 into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and 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 300 (instant download)