Retirement corpus needs keep on increasing every year
Many people might have some retirement plan but retiring early can be tricky if we don't plan our retirement corpus properly. We should have a proper liquid corpus in mind to think about retirement. Today I was discussing with someone who wanted to retire in another 10 years. They have no idea what retirement is all about. Currently, they cannot even manage their expenses properly with what they are earning right now and have not been able to save anything yet.
The discussion continued and I was explaining her about the need for the corpus fund before retiring. That's when I thought the corpus need keeps increasing every year. I remember that 10 years back I was thinking just 1 crore should be sufficient to live a good life with the passive income from the corpus. Today even if we have 5 crore it may not be sufficient I guess. To be safe with all basic needs we might at least need 3 crore in India. And it also depends on which city we would like to live in. If our life is going to be in a small town or village, the monetary need will be very small.
Inflation is a parameter
There is inflation and every year the value of the money is also depreciating. Some people suggested cryptocurrencies as an alternative for the regular FIAT just for this very reason. If the value of a crypto is down right now, it might increase when there is a bull market. But this is not the case with regular FIAT. The value is greatly affected due to inflation and it never recovers back and becomes cheap again. The government will keep printing new money increasing inflation even further.
The value of something 10 years back will either be double or triple and if we have had the same amount of money we had 10 years back, the item that we are planning to purchase may no longer be affordable. This is the effect of inflation.
Saving is important for retiring early
We need to have a proper saving habit. It can be a risk-based investment or a regular investment that sits safely in an FD and provides the passive income we need. Only the amount of money we save regularly becomes the safe corpus fund that will help us retire early. After working for several years in a day job, if we don't have enough money saved, we might end up being in a debt trap and we may not be able to reach the retirement corpus we might need.
Getting into debt is okay but at the same time, we have to make sure we are moving our funds into savings too. If we don't save enough then we might get out of debt but we may not have enough corpus fund with us. Many successful people who have retired early have said that they had focused on increasing their corpus funds and looking at how much safe passive income their corpus funds were creating for them.
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💯 agreeing with you..
I was wondering if there has been ever a negative inflation. Because the rate at which things are going the amount required for early retirement may have couple of more zeros attached to it.
I calculated back in 2019 for myself it came about 3.4Cr it was absurd back then and not I am not even able to think clearly anymore.😅
No worries. Hopefully we all may find what we are looking for.
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A 3.5 Cr amount invested for a 12% return will generate 3.5 lakh a month. After 30% taxes it will be 2.5 lakh a month. Is that really the amount you need for a retired life ?
I'm wondering how to calculate the retirement corpus.
Haha, @blog-beginner.
This is what exactly I was talking about the other day. My Calculation involved Low Risk Low return model and I wasn't even aware at that point about the instruments which can provide up too 12% returns. The Calculation was done with the 5.5% in mind which would INR 1925000 and after the Taxes INR 1347500. So 1.2 Lac per Month. And I added a little bit of luxury element in my retirement. But still as you can see I was way off from the calculation. Plus now the new factors are involved like Kids, Their Education and Home so. I think its time I redo it again.
For a salaried employee disciplined and consistent investment in PPF, EPF, VPF and then equity and mutual funds is the way to go. Let it accumulate for around 15 years and it should give you a great cushion.
In parallel term plan, medical insurance is a must.
I need to redo my ledger for this year. Since March is here I will do it.
Exactly, I am going to do the same. For me I am going towards the Equity.
And with a promise to myself that, I will make sure that My Son and future kids knows what investment is from early ages so they dont get lost in the financial journey.
Best way to teach your kids about savings is to buy them a piggy bank(Gullak in Hindi). I as a kid used to save money in that gullak and would buy luxurious things that we could not afford back then.
Same here. My son is just 3 months old. I already bought a piggy bank for him.
Every year I think we have to keep adding one more crore. That's how the inflation is going on I think.
Yup, no answer to the inflation yet. The only solution so far it to invest in instruments that beats inflation and take risk.
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And really trust me, it is hard for us to see that a lot of people are not planning retirement as they should which will affect a lot of people and which is not supposed to be so actually
Honestly , things are getting harder and expensive everyday that some people cannot even make enough money for themselves and someone like that cannot save for retirement
It isn’t possible
You're right, saving is important to retire early. I believe I have thrown away too much money in my life... if I then think about the money I have thrown away in the last 10 years and which I could have invested in cryptocurrencies instead, then I feel bad
Everyone has a similar regret I guess. But it is never too late. Even if we start saving up now, we can definitely save a decent amount.
You're right, it's never too late. In the crypto market we can still do something
Would love to understand how did you calculate your retirement corpus. There might be online ones but out of my experience they are too basic. They don't consider all parameters we can think of.
Yeah I mostly think in such a way that I would like to have a corpus fund that can give me passive income equivalent to my current take home or at least a minimum of 1 lakh right now.
Even if we have that corpus funds, we still have to keep chasing inflation too.
har joi aj ka early retirement ke soch raha hia but not all can do that, making a side income besides the job can help a lot. great post as always bade bhai, good day har har mahadev.
!giphy great
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Thank you so much Bhai. 🙏
the story of the fiat monetary system have been heard near and far. The continuous depreciation in this currency sometimes makes it look as if we are working for nothing.
Every savings at some point should be pulled out into an invesent or you may retire with a worthless account. Nice article friend, thanks.
If we don't keep up with the inflation, then the value will keep going down.
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The mistake a lot of people always make is to make sure they stay till the very end before planning retirement which should not be so actually