Retirement Planning

The thought of retirement often conjures up visions of a worry-free couple lounging by the beachside watching the sun go down. And the popular belief is that for that precious moment to arrive in one’s life, one has to slog it out for years and wait till the official retirement age dawns (60 years in India). Is retiring really that complicated?

Almost every individual today aspires to retire early, so that he could pursue his other passions - be it music learning, travel or a voluntary work. Sometimes, retiring early is just to get time to spend with family sans the stress of daily deadlines and travel.

 If you’re reading this, you’re probably one such person. And the first question in your mind is that is it even possible?

The answer is YES and we’ll show you how.

 To start with, the essence of retiring early is about achieving the financial strength to be able to do so. Since your savings must pay for expenses during retirement, the question to ask yourself is “Are you saving enough financially to be able to retire early?”

The  Two Most Important Aspects to Worry About For an Early Retirement

#1: Becoming a crorepati might not be enough for a comfortable early retirement 

While having a crore of rupees sounds great on paper, is that really enough when you retire? Let’s do some simple math.

If you are currently 30 years old with an annual salary of Rs 6 lakh, your annual income at retirement (60) should be

roughly Rs 60.37 lakh to match your current earning levels (taking into account inflation @ 8% p.a.). That makes your 1 crore dream not even equivalent to two years of your then salary.
To get a more accurate idea of how much money you earn today will become X years later on, use this tool (Ignore US Dollars).

So, how much money do I actually need to retire early?
With inflation on the rise, you need much more than you actually think you do.
For example: a 30 year old, targeting to retire at the age of 60 and spending around Rs 50K per month will require Rs 7.19 crore on retirement (assuming
inflation @ 8%p.a., life expectancy of 85 years, and no income post retirement).
To get a more accurate retirement amount required for your current scenario, use this tool.

#2: The earlier you start investing for retirement, the earlier you can retire

Sounds pretty simple, right? But did you realize how much each year of delay could affect you? The more you delay, the more you would need to invest each month to reach the targeted corpus.
For instance, (refer table below) to reach the targeted corpus of Rs 7 crore on retirement, you need to invest Rs 11,000 each month into equity funds if you start at 25 as against Rs 71,000 per month if you start at 40.

Investment Required to Reach 7 Crore Corpus

Assuming you invest in equity mutual funds @12% p.a. average return and bank Recurring Deposit (RD) @ 6.5% p.a. post-tax return.

Starting Age


Monthly Investment

Corpus- Bank RD

Corpus- Mutual Funds


Rs 11,000

Rs 1.76 Crore

Rs 7.07 Crore


Rs 20,500

Rs 2.26 Crore

Rs 7.16 Crore


Rs 71,000

Rs 3.48 Crore

Rs 7.02 Crore


Rs 3.05 Lakh

Rs 5.1 Crore

Rs 7.01 Crore

You might be beginning to think that early retirement seems impossible. But we’re here to help you. All you need to do is follow the 5 simple rules below:

Rule #1: Save First. Spend Later

This rule is pure common sense - but most uncommon among people. Save at least 30% of your take-home salary and only then start spending your money.

To make it easier, set up an automated monthly investment, say, on the 7th of every month, so that 30% of your income goes into an investment product (mutual funds, stocks, bonds, deposits etc.)

To retire @ 53 years (7 years early) and accumulate a corpus of Rs 10 crore, you need to invest as follows (assuming you have no prior investments)

Starting Age

Monthly Investment

Tradition Savings Pre-Tax

Traditional Savings Post-

Equity Mutual Funds


Rs 24,000

Rs 3.64 Crore

Rs 2.29 Crore

Rs 10.04 Crore


Rs 49,000

Rs 4.51 Crore

Rs 3.12 Crore

Rs 10.01 Crore


Rs 2,30,000

Rs 6.82 Crore

Rs 5.64 Crore

Rs 10.18 Crore

Use this calculator for your current scenario (ignore the £ symbol). Equity mutual funds @14% returns annualized. Traditional savings @9% pre-tax and 6.5% post-tax.

Rule #2: Invest in Equities for the Long Term

As could be seen from the table above, as you delay your investing decision, your monthly investment requirement is going to skyrocket. For instance, a five-year delay for a 20-year old could mean shelling Rs 12k more each month till he or she turns 53.

Generally speaking, while the investment requirement (given in the table) might seem large, the trick is to make your money work harder by investing in assets that generate higher returns.

Equity (shares of companies) is one of the best options for you to generate higher returns. While investing in equities directly might be complex, you can always go with mutual funds, managed by professionals, which also invest into equities on your behalf.

Rule #3: Avoid Debt- As Much As Possible

Any form of loan (or debt) will drive down your savings. You might think, “The EMI (on the loan) is small, I can manage to pay it off easily”. However, in the long-term, you are paying much more, thanks to higher interest on the loan and the opportunity cost of not being able to invest that EMI amount into a high yielding investment.

So reduce debt and cut down on unnecessary spending to save as much as possible.

Rule #4: Invest Smartly In Various Assets

Most Indians prefer to invest their savings into real estate or gold. And if they earn more savings, probably back again into second or third house.

While real estate and gold are indeed good assets to have in your portfolio, getting all your money locked into a single asset class is very risky. You should diversify and invest in other assets as well.

Equity, debt, bank deposits, bonds, corporate deposits are some of the investment opportunities you should explore.

Remember: The riskier the investment is, the higher the return it could potentially give. In the long run, equities have outperformed real estate and bank deposit in terms of returns. Historically, equities have also given the

highest returns as against fixed deposit, which most of the times have even failed to beat inflation.

Rule #5: Be Prepared For Unforeseen Events

One of the biggest mistake people all around the world make is considering insurance as an investment. However, insurance is NOT an investment product and only an instrument for mitigating risk.

While we make plans for 10 crore retirement corpus, have you thought of what happens if something goes wrong in your plan? What if the sole bread owner of the family passes away? The family still needs money to survive, but there is no income to supplement it. That’s why you should be prepared for such unforeseen events and takes insurance (health and life).

We recommend you plain-vanilla term-insurance plans (which only provide life cover) as against money-back plans (life cover plus investment) which usually give you extremely low returns. You are better off investing the latter money in other assets to generate higher returns.

If this is looking like too much work, we

have created a simple financial plan

which everyone can follow

Our Golden Nugget of Wisdom

While Rs 10 crore is a good amount to retire with, you can retire with much less money. You could even retire with 1 crore of rupees or less, provided you are willing to make necessary changes to your lifestyle.

The more you save and the less you spend, your expenditure goes down and your savings go up. And if you adopt a frugal lifestyle, the faster you move towards worry-free retirement (even while you are just 30 years old).

It’s a lifestyle choice you have to make. Retire @53 yrs with several crore of rupees to maintain your lifestyle or be frugal and retire even early (say when you are 40) and adopt a simple lifestyle.

Assuming you are 30-year old, you can retire @40 yrs by investing Rs 50,000 every month.  If you invest intoequity mutual funds (which give you an annualized return of 16%),you can get Rs 1.48 crore on retirement. Now, if you invest this 1.48 croreof rupeeson a safe instrument like bank FD, you will get Rs 1.35 lakh every month as interest (same purchasing power as roughly Rs 60,000 today).