Can I retire at 40 with one crore in India? Early retirement feasibility check

Published: March 8, 2019 at 10:17 am

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Can I retire at 40 with one crore in India? Is it possible to retire early in India with just one crore? Since the answer is not a simple “yes” or “no” let us do a how to retire early at 40 feasibility check with some reasonable and close to reality assumptions. First, it is important to understand what early retirement means and what it is not. SInce there are many misconceptions about FIRE – financial independence, retire early, I would strongly suggest that you check out this video first.

Assumptions for a 40-year-old with one crore wanting to retire early in India

Can I retire at 40 with one crore in India? Early retirement feasibility check

Not every 40-year-old can retire early. So we will have to define our universe and make several assumptions. The feasibility of the plan entirely depends on these assumptions. So utmost care is necessary. For a more thorough feasibility check please use the fornical Robo Advisory Software Template.

Warning: This article has several projections based on assumptions which can often be far removed from reality. So no part of this article should be considered as investment advice. It is meant to educational to a potential early retiree. I shall take no responsibility for your gains or losses arising from adapting this or any other approach discussed here. Be sure to read the limitations section below.

  1. The person is unmarried or married without kids (with no plans to become parents). Unless there is there is a separate corpus to provide for their needs, it is not possible to retire early with kids in India with just one crore. No need to compute that!
  2. We shall assume that the spouse or partner does not work.
  3. There is no separate emergency fund
  4. Health insurance for Rs. 25 lakh is available and the premium at 40 is Rs. 15,000 for a single person and Rs, 25,000 for the couple (floater, both aged 40). The health insurance premium increases every 5 years by 10%
  5. Current annual  expenses are Rs. 2.5 Lakh year (20K a month) for one person and Rs. 30K for two. This is assumed to increase at 6% inflation year on year.
  6. Forty lakh is put in fixed income that returns 6% a year (post-tax). The rest in equity with a 10% post-tax return assumption. As pointed out earlier: if we want to be financially free, we should not count on frugality, but worry about sequence of returns risk! So instead of a constant 10% return, testing with variable return testing is mandatory but we do not have enough history for this. We shall however consider one example.
  7. From the six year onwards, we shift 10% of equity corpus  to fixed income.

How to retire early at 40: Case 1: single: early retirement feasibility check

This table illustrates how the above assumptions play out year on year. I shall explain how to create this table in a video. The number under “how long will the money last?” column is calculated as: total corpus (year end) divided by expected annual expensed in the next year. When this number falls below one, income withdrawals are not possible. The idea is to ensure that this number fall below one at least after age 85 (of the younger spouse/partner).

For Rs. 20,000 monthly expenses and 15,000 health insurance and above assumptions the corpus can last up to age 95-96 which is decent. Scroll down the table to see pictorial representation.


Age Total expenses Fixed Income corpus year end Equity corpus year end How long will the money last?
40    2,55,000      39,69,700     66,00,000            39.23
41    2,69,400      39,22,318     72,60,000            39.28
42    2,84,664      38,55,913     79,86,000            39.36
43    3,00,844      37,68,374     87,84,600            39.48
44    3,17,994      45,88,569     86,96,754            39.34
45    3,37,674      54,27,805     86,09,786            39.33
46    3,56,945      62,87,749     85,23,689            39.25
47    3,77,371      71,68,512     84,38,452            39.11
48    3,99,024      80,70,133     83,54,067            38.92
49    4,21,975      89,92,579     82,70,527            38.54
50    4,47,953      99,33,979     81,87,821            38.25
51    4,73,742   1,08,95,761     81,05,943            37.92
52    5,01,077   1,18,77,594     80,24,884            37.55
53    5,30,053   1,28,79,032     79,44,635            37.13
54    5,60,767   1,38,99,492     78,65,188            36.57
55    5,95,139   1,49,36,324     77,86,537            36.09
56    6,29,649   1,59,90,448     77,08,671            35.57
57    6,66,230   1,70,60,790     76,31,584            35.02
58    7,05,006   1,81,46,078     75,55,269            34.45
59    7,46,109   1,92,44,826     74,79,716            33.76
60    7,91,674   2,03,53,191     74,04,919            33.13
61    8,37,857   2,14,71,176     73,30,870            32.48
62    8,86,810   2,25,96,500     72,57,561            31.80
63    9,38,701   2,37,26,568     71,84,985            31.11
64    9,93,706   2,48,58,442     71,13,135            30.33
65  10,54,207   2,59,86,482     70,42,004            29.60
66  11,16,010   2,71,09,153     69,71,584            28.84
67  11,81,521   2,82,22,278     69,01,868            28.08
68  12,50,962   2,93,21,193     68,32,850            27.29
69  13,24,571   3,04,00,701     67,64,521            26.45
70  14,05,011   3,14,52,471     66,96,876            25.64
71  14,87,718   3,24,72,507     66,29,907            24.82
72  15,75,386   3,34,53,718     65,63,608            23.99
73  16,68,315   3,43,88,270     64,97,972            23.14
74  17,66,819   3,52,67,522     64,32,992            22.25
75  18,73,892   3,60,79,146     63,68,662            21.39
76  19,84,571   3,68,15,327     63,04,976            20.51
77  21,01,892   3,74,64,569     62,41,926            19.63
78  22,26,251   3,80,14,261     61,79,507            18.74
79  23,58,073   3,84,50,587     61,17,712            17.82
80  25,00,726   3,87,55,330     60,56,534            16.92
81  26,48,840   3,89,14,872     59,95,969            16.01
82  28,05,842   3,89,11,145     59,36,009            15.09
83  29,72,263   3,87,24,432     58,76,649            14.17
84  31,48,669   3,83,33,233     58,17,883            13.22
85  33,38,876   3,77,10,714     57,59,704            12.29
86  35,37,086   3,68,34,574     57,02,107            11.35
87  37,47,189   3,56,77,051     56,45,086            10.41
88  39,69,898   3,42,07,961     55,88,635              9.46
89  42,05,970   3,23,94,506     55,32,749              8.50
90  44,59,743   3,01,97,320     54,77,421              7.55
91  47,24,993   2,75,81,273     54,22,647              6.59
92  50,06,159   2,45,04,421     53,68,421              5.63
93  53,04,194   2,09,21,294     53,14,736              4.67
94  56,20,111   1,67,82,616     52,61,589              3.70
95  59,58,874   1,20,30,895     52,08,973              2.73
96  63,13,839      66,12,231     51,56,883              1.76
97  66,90,101        4,64,087     51,05,314              0.79
98  70,88,939 –    64,81,180     50,54,261            -0.19
99  75,11,708 – 1,42,96,710     50,03,719            -1.17
100  79,64,122 – 2,30,66,087     49,53,682 #DIV/0!

Early retirement at 40 in India. Results for single person with 20,000 monthly expenses and Rs. 15,000 health insurance

Can a single person retire at 40 in India with one crore?

Answer: Possible; Probable; However needs tremendous luck (see limitations below)

How to retire early at 40 Case 2: Couple (no kids): early retirement feasibility check

Monthly expenses: 25,000. Health insurance premium (annual): Rs. 25,000. All other assumptions as above.

Early retirement at 40 in India. Results for couple with no kids and 25,000 monthly expenses and Rs. 25,000 health insurance

Can a couple person retire at 40 in India with one crore?

Answer: With 25K monthly expenses (+ health insurance costs) the money will last until 84. So it would be a huge risk (see limitations below)

Monthly expenses: 30,000. Health insurance premium (annual): Rs. 25,000. All other assumptions as above. The money will last only until age76.

How would a couple need to retire at 40 in India?

At least 1.5 Crores.

What are the limitations of this study?

Let us go over each of the assumptions

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  1. Monthly expense reasonable but sudden jumps in expenses due to sickness is not considered.
  2. Lifestyle creep is not considered
  3. Inflation assumption of 6% for current expenses is “ok”, but 8% is better.
  4. Fixed income post tax return of 6% is just about possible
  5. Equity post tax return of 10% is just about possible. However unlike when investing for retirement, this number has little relevance as sequence of returns has to be considered as done here: Want to be financially free?  Worry about sequence of returns risk!
  6. Health insurance costs could suddenly shoot up because of changes in company policy
  7. 10% transfer from equity to fixed income is possible and necessary but is it practical?
  8. No emergency corpus is accounted for. Reimbursement health claims can get in trouble otherwise (one can make do with a credit card to some extent). At least 15-20 lakh emergency corpus would be better.
  9. Anything else? Please leave a comment.

Factoring in the sequence of returns

We have assumed equity return each year is a nice 10%. This is how returns would fluctuate in reality.

Early retirement sequence returns risk

Early retirement sequence returns risk for Sensex

The problem is that there are only 39 data points. This means I can test only one sequence of returns. I will need to test at least 100s of sequence of returns for which we do not have data.

Even for this one favourable sequence of return (where above results are not altered much), the equity corpus can fluctuate this much. How many early retirees can stomach? How many of them have such an experience?

equity corpus fluctuations in early retirement corpus when sequence of returns are included

So I would recommend a higher corpus so that you can live off your fixed income assest for at least 15 years while equity recovers. Use the Key features of the freefincal robo advisory software template to stress test your retirement plan. Do not be in a hurry to quit with just one crore.

What is FIRE: Financial Independence, Retire Early

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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