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Use this financial freedom calculator spreadsheet to answer questions like, “When can I retire?” and “When should I retire?” and hopefully understand the difference between them with minimal inputs.
For a given age and life expectancy, along with other standard investment and inflation details, the years to retirement is calculated by determining when the monthly income from the corpus is higher than monthly expenses.
This version is best suited for young earners who are just starting out. An advanced Financial Freedom Calculator More ‘experienced’ earners and/or those with liabilities can try out the Financial Freedom Calculator.
Here is a screenshot (click on it to enlarge)
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The calculator computes the inflation-protected monthly income necessary each year in future from the retirement corpus accumulated. When such an income equals monthly expenses, financial freedom is achieved.
Download the financial freedom Calculator
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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. 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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I believe this calculator projects the age when the monthly returns on investment plus corpus is greater than the monthly expense. It does not consider eating into the corpus during post retirement period.
Their seems to be an error in calculation, for example, if you key in
Total investment till end of this year – 4 cr
Monthly expenses = 2 lacs
Inflation 7%
Post Tax Interest on portfolio = 9%
It returns 13 years.
4cr corpus, 7% inflation and 9% post-retirment return (dont know what you meant) will give monthly income of 2L for about 19Y. So the answer depends on the inputs that you give. If you want income for a longer duration then it will take to retire.
Dear Sir
It would be helpful if you could provide a similar calculator for a middle aged NRI person in 40s. residing in Gulf States. Also a MF recommendation for a NRI in 40s age.
The inputs do not depend on your residential status. I do not provide investment advice.