Nowadays, my Facebook feed is filled with either pictures of my friends getting engaged or married or having kids. So, I was really surprised to find a retirement planning post in my feed. (Kudos, Facebook analytics team!).
The viral post, written by a Texas resident, highlighted the man’s idea to spend his post retirement life in a holiday resort instead of an assisted living facility. The man argued:
What an interesting hypothesis, I thought to myself, and begun analysing if sustaining such a lifestyle was possible in the Indian context.
Table 1: Average hotel expenditure in Rupees
|Particulars||Daily Cost||Yearly Cost|
|Cost of an average 3-star hotel in Mumbai||3,500||12,77,500|
|Cost of daily medical care||1,500||5,47,500|
|Meals and local travel||1,000||3,65,000|
So, I delved a litter deeper. It turns out that the daily cost of a 3-star hotel is Rs 3,500. Add to this the assumed daily healthcare cost of Rs 1,500 and Rs 1,000 for local travel and meal expenditure. The total per day cost is Rs 6,000 which adds up to an annual expenditure of Rs 21.90 Lakhs.
Table 2: Facts and data crunching can get you the retirement corpus you need
|Age (at present)||60 years|
|Retirement planned at age…||60 years|
|Life expectancy||85 years|
|Monthly Household Expenditure||Rs 1,80,000|
|Time to retirement||0 years|
|Expected inflation per year||8.00%|
|Monthly Expenditure – at retirement age||Rs 1,80,000|
|Annual expenditure at retirement||Rs 21,60,000|
|Post retirement inflation||8.00%|
|Post retirement life expectancy||25 years|
|Expected return post retirement||6.95%|
|Corpus required at time of retirement||RS 608,67,659|
Let’s look at my father’s financial case for example. To lead a 25-year-post retirement life using the idea of the Texan individual, my father will need a retirement corpus of Rs 6.08 Crore! That’s triple of what he can afford to retire with.
When I told my father the story of the gentleman in Texas and that to sustain the same lifestyle in India, he will need a retirement corpus of Rs 6.08 Crore, my father sarcastically replied, ‘Well great. It took me 35 years to create a corpus of Rs 2 Crores, so I only have to work for another 70 years and hurray, I will accumulate a corpus of Rs 6 Crores!’
‘You see Deepika, when you retire the objective is not to lead a lavish lifestyle but a happy life. I’m not saying that the Texan’s idea of retirement is wrong. But once you retire, you want simplicity and stability. You can’t get that if you are checking in and out of resorts and motels every other month. The Texan individual is able to ‘get by’ in the Rs 6 Crores, whereas I can live like a king with the same corpus here, in India. Having said that, what is life if you don’t shoot for the stars?’
Table 3: Living life like a king with a Rs 6 crore corpus…
|Age||Opening Balance (In Rs)||Withdrawal for necessities (In Rs)||Withdrawal for yearly Travel (In Rs)||Withdrawal for Medical (In Rs)||Total Withdrawal (In Rs)||Closing Balance (In Rs)|
My dad was right! In Rs 6 crore, he can spend Rs 6 lakhs every year on household necessities (more than enough for a couple), Rs 1.50 lakhs on medical needs, plus go on exotic holidays every year. After doing all this, he would still end up with a surplus of 4.22 crore at age 86. Now that’s retiring like a king!
Sure, the idea of retirement is different for different individuals and there really can’t be a one-strategy-fits-all when it comes to retirement. What you want from retirement differs from another individual. For the Texan, retirement was all about adventure whereas for my father it is about peace.
So, irrespective of the corpus, build a retirement plan that helps you live the life you want and not the life that you need to.
George Foreman (an American boxer) famously said, “The question isn’t at what age I want to retire, it’s at what income”.
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Editor’s note: If you wish to live a comfortable life post-retirement, don’t miss out on PersonalFN’s Retire Rich service.
It is a DIY (Do It Yourself) retirement solution, where you can start planning for your retirement and potentially build a substantial corpus that could sustain you in the golden years of your life.
Author: Deepika Khude
This article first appeared on PersonalFN here
PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.