I have noted in the past that being financially independent is very much possible for an average person earning average income both in the US and in India.
Yet this February 2018 article suggests that the middle class in India requires at least Rs.100 m in retirement funds in order to maintain a reasonable lifestyle. This assumes a post tax annual income of Rs.3 m. There are two problems with this:
One, we don't know what a reasonable lifestyle is; in fact, it differs from person to person. Two, required annual income is a function of today's cash and its time value. Annual costs of Rs.3 m today is more than reasonable for the middle class. Whereas its present value is in excess of Rs.1.5 m if we consider 10 years from today and assume inflation rate of 6% during the period; and even this I reckon is probably more than reasonable for the most middle class in India. Even after 20 years, the present value of Rs.3 m is close to Rs.1 m. Not many middle class earn that much today. So we need to define when this Rs.3 m is relevant.
But the author does make valid points regarding patience and quality of the underlying business, which the so-called investors do not adhere to.
And now in May 2018, I find this article and the discussion thereafter suggesting that retirement in India requires at least Rs.150 m in order to maintain a comfortable lifestyle. They say that the required annual income from this capital is Rs.5 m to Rs.10 m; and their required rate of return to beat inflation is 10%, and 15% for a comfortable lifestyle.
By the way, 10% return on Rs.150 m is Rs.15 m pretax, which could be close to Rs.10 m post tax. And the present value of Rs.10 m at 6% inflation rates over the 20-year period is over Rs.3 m. I am not too sure whether a couple (as the article suggests) retiring in India requires more than Rs.3 m annually. It would be too naive to generalize and conclude; yet, I can say for the most that income (which is about $45,000) should be able to give a reasonably comfortable lifestyle, for there aren't too many making that much in India.
Instead of being specific, it is better to leave it to the person to decide what is reasonable and what is comfortable. That said, my take is that both India and the US are not that expensive to live a good life. A capital of Rs.150 m (or $2.25 m) capital in 20 years is worth over Rs.45 m at 6% inflation and $1.25 m at 3% inflation as of today. Think about it.
My calculation of the required capital for retirement is simple as I have noted here; it is better to assume a zero real rate of return over the period. That means the return earned on capital is equal to the inflation rates during the period. The calculation then becomes both easier and conservative, and the capital required, a function of only two factors: One, sustainable annual expenses in today's value, and Two, the number of years. Here we don't assume reasonable and comfortable in generalized terms.
For instance, if the W couple's annual costs are Rs.650,000 ($10,000) and the number of years of retirement is 30, the required capital is Rs.19.5 m ($300,000). If the C couple's costs are Rs.1.95 m ($30,000) and years are 25, the capital required is Rs.48.75 m ($750,000). You see how it is to each, his or her own. That's the way it should be. And the added flavor is that usually you do get to earn in excess of inflation rates.
In my view, retirement is a terrible word; it denotes doing nothing, which is not the way to lead life. Never let mind and body lay idle. The key is to be financially independent as soon as possible, and then take up something that excites you in life which you can keep doing as long as you can. There are times when this excitement can be monetized too; that's the icing.
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