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

Last Updated on February 13, 2024 at 2:00 pm

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

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 freefincal 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.

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 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!
We shall assume that the spouse or partner does not work.
There is no separate emergency fund
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%
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.
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.
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!

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.

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

Monthly expense reasonable but sudden jumps in expenses due to sickness is not considered.
Lifestyle creep is not considered
Inflation assumption of 6% for current expenses is “ok”, but 8% is better.
Fixed income post tax return of 6% is just about possible
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!
Health insurance costs could suddenly shoot up because of changes in company policy
10% transfer from equity to fixed income is possible and necessary but is it practical?
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.
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.

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?

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

https://www.youtube.com/watch?v=5GIRC9Fmmwc

What is FIRE? Understanding Financial Independence, Retire Early & Mini-Retirements (https://www.youtube.com/watch?v=5GIRC9Fmmwc)

About The Author

Dr 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

Twitter @freefincal
Facebook
Subscribe to our YouTube Videos
Posts feed via Feedburner.
Pinterest

Our publications

You Can Be Rich Too with Goal-Based Investing

Published 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 This 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

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)