This post is a sequel to the low-stress retirement calculator published a few months ago. With this calculator, you can reduce the total retirement corpus required by about 10%-12% for normal retirement (age 60) and the monthly investment required by 20-30%. The reduction could be even more significant in the case of early retirement.
How is this possible?
Most retirement calculators (including all of mine published thus far) use a single rate of return post-retirement. Instead of this, why not use a bucket strategy?
Instead of this, why not use a bucket strategy?
Here, the retirement corpus is invested in different buckets of varying volatility. Expenses for the first (say) 5 years are met with by creating an income ladder (typically with fixed deposits on paper. Short-term debt funds will make this easier).
Meanwhile, the rest of the corpus grows at different rate of returns. The amount necessary to create income ladders between years 6-15 grow in low-risk instruments, while the rest if the amount grows in more volatile instruments.
This method has been explained in detail in the following posts:
- Illustration: Passive Income Generation
- how to generate inflation-protected income from a lump sum
- Income ladder calculator
- Also see Early retirement resources at freefincal
I have resisted the temptation to do this several times earlier. However, I find that many young earners are put off with retirement planning when they see the corpus required and the monthly investment necessary.
Therefore to alleviate their stress, such a union of accumulation (pre-retirement) and distribution (post-retirement) strategies seemed necessary.
I hope this tool is able to help to achieve that.
A word of caution. The calculator has two sheets. One is the input sheet and another for the income ladder calculation. I suggest that young earners far from retirement do not change the conservative inputs in the income ladder sheet.
Download the even lower stress retirement calculator!
Register for the New Delhi DIY Investor meet: April 23rd 2017Get free, yet comprehensive calculators, tools and analysis delivered to your mailbox! Subscribe to get posts via email
Buy our New Book!You Can Be Rich With Goal-based Investing A book by P V Subramanyam (subramoney.com) & M Pattabiraman. Read more about the book and pre-order now!