[srsrini]

Originally Posted by Cessna182

Looking at the numbers here, I am not sure how a normal Indian can even afford retirement. If you earn about a lakh a month after tax (ctc is around 18 to 25 per annum depending on the company pay structure) then your expenses in even a cheaper part of the city will be about 50 to 60k if you do not splurge. Savings of about 5 lakhs a year. Even in 20 years with a disciplined lifestyle one cannot make a reasonable corpus. This CTC is very decent in India- most earn far less. Yet, even a person with this salary cannot retire.

One might say that the salary will rise etc. But how many people do you know of who earn more than 30 to 40 lakhs a year outside the tech bubble? A GM at a blue chip like Bajaj or Mahindra will get around 30 to 40 lakhs a year and one reaches that position in the 50s. A few top executives may earn more, but even the business heads in the bluechip firms have a salary of less than 60 to 70 lakhs and again, you usually reach that position quite late in your career. One can verify this by looking at the annual reports of these companies.

Unless you have access to ancestral properties or wealth, or a very successful business, it is simply impossible to retire in India. Wages have stagnated in the last few years but prices of things like medical care have gone up drastically.

A couple of things here.

1. In your numbers, there is presumably a good chunk going into EPF. This can add up to quite a bit. If you sit down and calculate what your EPF balance would be, say when you are 50, you could be pleasantly surprised.

2. I see most people make this mistake when estimating expenses. You need to sit down and see the expense categories that would continue in retirement, and could go up then. You should remove categories - like school fees, other kids related expenses, etc. This can make a big difference. The earlier person mentioned 18 lac per year; I feel that this includes some categories that could go away.

3. When you estimate the future corpus, go ahead and estimate the current value too. With a discount rate of 7% even, a corpus of 30 cr in 30 years is more like 3.75 crores now.

[rdst_1]

Originally Posted by Cessna182

Looking at the numbers here, I am not sure how a normal Indian can even afford retirement. If you earn about a lakh a month after tax (ctc is around 18 to 25 per annum depending on the company pay structure) then your expenses in even a cheaper part of the city will be about 50 to 60k if you do not splurge. Savings of about 5 lakhs a year. Even in 20 years with a disciplined lifestyle one cannot make a reasonable corpus. This CTC is very decent in India- most earn far less. Yet, even a person with this salary cannot retire.

One might say that the salary will rise etc. But how many people do you know of who earn more than 30 to 40 lakhs a year outside the tech bubble? A GM at a blue chip like Bajaj or Mahindra will get around 30 to 40 lakhs a year and one reaches that position in the 50s. A few top executives may earn more, but even the business heads in the bluechip firms have a salary of less than 60 to 70 lakhs and again, you usually reach that position quite late in your career. One can verify this by looking at the annual reports of these companies.

Unless you have access to ancestral properties or wealth, or a very successful business, it is simply impossible to retire in India. Wages have stagnated in the last few years but prices of things like medical care have gone up drastically.

I think the system of 'pension' had a lot to do, allowing the previous generations to work with lower salaries. I can give the example of my father and my brother. My brother's first job allowed him to get paid nearly 75% of what my father's salary was at retirement (around 12L after taxes). My father also didn't have a lot of savings because he always preferred living 'in the present' and have just enough savings. When he retired, he only had around 50L in savings and a house built in Himachal where he could retire to. When I look at the figures in this thread, just like you, I feel it is an impossible task. My brother, who is still single and earning around 9L (after taxes) finds it difficult to have any savings and we worry for him.
What allowed my father to not worry about having a large corpus, was that he would get pension. Unfortunately, he passed away quite soon after his retirement, but if he was alive, he would still be receiving around 65k (pre-tax) as monthly pension, which would mean he would have a pretty comfortable headroom when it came to continue living as he was before retirement.

Coming to the second topic which was being discussed in the last few pages. I am someone who moved to the mountains to become a farmer. It certainly helped that I did it when I was 28, had no job till then, and I had ancestral property and a home built on that, and a father whose pension was still enough to support me. Unfortunately, like I said, he passed away, but the family pension of around 33k today and interest from FDs is still more than enough to sustain me and Mom till my dairy farm was up and running.
Before, I moved here, even I was making anywhere between 50-75k a month in my small business I was running from home. Losing all this regular income, however, had not much affect on our lives. I realized very soon after moving, that we spend money on a lot of unnecessary things when living in cities and my parents especially didn't find any change whatsoever that would make their new experience uncomfortable. We were never avid mall shoppers and what little shopping excursions we used to have every 6 months had all but stopped thanks to online shopping. My parents would only go to eat-out on special occasions or once every 2-3 months at best. Thankfully, there are enough good cafes and restaurants around my place that we have good choices available even if limited in number. Also, one has so many newer experiences that can keep them busy, like exploring your surroundings, going for new treks, and in my case, go paragliding whenever we want to, or get to see and play in snow, before the tourists arrive.
If one also takes up farming, then they can never get bored as there is so much work to get done and it keeps you busy throughout the year.

[Saanil]

Originally Posted by srsrini

A couple of things here.

2. I see most people make this mistake when estimating expenses.

These are valid points srsrini. The first step in planning your retirement is to get an accurate estimate of current/future expenses. This is certainly not an easy exercise. Please note that my expense estimate did not include certain expenses (higher education of my children, marriage expenses of children).

I tried estimating just the food expenses of our house and I gave up as there were too many variables (vegetables, milk, bread, oil, spices, nuts, fruits etc). I realized that it was not possible for me to estimate food expenses without consulting my mother/wife.

I also had a detailed discussion with my father about accounting for electronic expenses (like buying mobile phones, TV, AC, refrigerator). I realize that these things are bought once in many years but one needs to account for them somehow in the annual expense calculation. I gave up this exercise as it was becoming too complicated.

Originally Posted by rdst_1

I think the system of 'pension' had a lot to do, allowing the previous generations to work with lower salaries.

I am not an expert but I think only public sector companies have the concept of pension. Private sector companies do give gratuities on completing certain milestones but as far as I know, there is no concept for pension payments in private sector.

It is possible that 30-40 years ago, majority of the employment was in the public sector so retirement planning was done automatically without any explicit mechanism (salaries were low probably because a part of it was deducted for future pension payment).

[huntrz]

Recently watched a documentary about money and how interest rates nearing to 0 is making life difficult for retired people. They saved their corpus while working and when interest rates were much higher whereas currently in their country interest rates are nearing zero. As a results cheap money is inflating assets like stocks and real estate where as the people with saving are not having enough risk free return from their corpus to survive.

I never thought from this angle. Inflation and interest rates are lower in developed economies. I have a feeling we, the current working generation, will run into similar problem in future. Government may keep the interest lower to fuel growth. We should therefore take into account this sort of situation by diversifying into assets that can hedge against interest rate decline. instead of solely relying on interest income we should diversify into planning for rental income and dividend income as well. Just my thoughts.
Here is the link to the documentary-

https://www.youtube.com/watch?v=t6m4...=DWDocumentary

[graaja]

Originally Posted by Saanil

...
I tried estimating just the food expenses of our house and I gave up as there were too many variables (vegetables, milk, bread, oil, spices, nuts, fruits etc). I realized that it was not possible for me to estimate food expenses without consulting my mother/wife.

I also had a detailed discussion with my father about accounting for electronic expenses (like buying mobile phones, TV, AC, refrigerator). I realize that these things are bought once in many years but one needs to account for them somehow in the annual expense calculation. I gave up this exercise as it was becoming too complicated.

If we have to plan for retirment, we need to know clearly what our expenses are today. This is where budgeting and expense tracking helps. I have been strictly tracking every expense we make for the past 5+ years, and this gave me a clear idea of where my money is going. This helps a lot in budgeting, stopping those unnecessary expenses and leaks etc. I classify my expenses into two categories - monthly and annual. Things we spend every month like groceries, vegetables, phone charges, dining out etc. fall under monthly and expenses like car service, car insurance, life insurance, kids's school fee etc fall under annual. Every year, I revise my budget according to the average spent in the previous year. It may sound complex, but if you get everyone at home to sign up for this, it is actually very easy to maintain this. Once you have data for a few years, it becomes easier to calculate the requirements for retirment figuring in inflation.

[SmartCat]

Originally Posted by huntrz

I never thought from this angle. Inflation and interest rates are lower in developed economies. I have a feeling we, the current working generation, will run into similar problem in future. Government may keep the interest lower to fuel growth. We should therefore take into account this sort of situation by diversifying into assets that can hedge against interest rate decline. instead of solely relying on interest income we should diversify into planning for rental income and dividend income as well. Just my thoughts.

Government bonds (gilt funds) will generate the best returns if interest rates head towards zero. Another option, as you said, is to invest in high dividend yielding stocks or REITs/INVITs. For those with large assets, investment in rent yielding properties (commercial or residential) works well too.

But India (and developing countries in general) is unlikely to head towards zero interest rate regime. That's because inflation will rear its head sooner or later, and RBI will be forced to increase rates. The reason why we have close to zero interest rates in US & Europe is because there is hardly any inflation there.

[DigitalOne]

Retirement planning advise that I give my younger colleagues and relatives. This is mainly for 25 - 35 years old city dwellers.

Do not buy a flat.

Live in rental house, close to work/school. Have a flexibility to move locality, cities, countries to better job opportunities. Buying a flat would constrain this movement for better career opportunities (yours or spouse); If you move, you will end up paying big EMIs for meagre rental yields.

Save aggressively in equities or other financial instruments. Spend wisely, and never on credit.

At around 45, start looking for tier-2/3 cities which is most comfortable to you. Base the decision of the city on where most of your folks are, not if it is a hill-station or a sea coast. If you want to live in a tier-1 city you can still look for outskirts.

Look for a brand new large flat, which you can buy outright with maximum 25% of your savings. Priorities should be security, primary conveniences (not 'features') like supermarket, medical, and a sense of community. Obviously 'features' like a higher floor, closeness to work/school, or swimming pool would not be primary. Don't decide in haste, take multiple trips to the flat, look for bargains.

When you are around 50 and your kids leave you to college/work, move to your brand new flat and live a good retired life.

Don't fall into peer/family pressure and buy a 2BHK at 30. After paying all EMIs, at 50, you will not be in a financial position to move to a bigger , newer flat and you will be stuck.

Please don't ask whether I followed my own advise. Hindsight is always the best teacher.

[sunilch]

Originally Posted by huntrz

Inflation and interest rates are lower in developed economies. I have a feeling we, the current working generation, will run into similar problem in future.

What you are saying is very true and applicable to all countries that are either developed or nearly developed. In such cases, Rental yield is quite good (look at some examples across the globe, baring the Pandemic period).

Originally Posted by SmartCat

But India (and developing countries in general) is unlikely to head towards zero interest rate regime. That's because inflation will rear its head sooner or later, and RBI will be forced to increase rates. The reason why we have close to zero interest rates in US & Europe is because there is hardly any inflation there.

However, as India will progress and grow then trend of lowering rates will remain. Look at our historical rates - say 30 years back. Our markets were not developed as much and neither was our economy as strong as it is today. PPF used to fetch 12% p.a.

But again, India has to grow a lot and it will take a long time. Not one generation for sure. Also, India has to remain a net exporter for multiple decades for this to happen. Which again is not easy for a country such as ours. This is something that may happen over next 50-75 years, assuming a lot of things remain in India's favor. At that point, you can expect very low (not near-zero) rates. Such a long period is actually a multi-generation period and not a single generation period

So when you calculate the income your cash assets may generate when you will retire - say in next 20 years - take a rate lower than what it is today by say 20-30%. You will be on the safe side.

[am1m]

Originally Posted by DigitalOne

Retirement planning advise that I give my younger colleagues and relatives. This is mainly for 25 - 35 years old city dwellers.

Do not buy a flat.

I think you and I belong to the same generation This is the single biggest 'dream' that was sold to us when we started our careers. Interest rates low, banks throwing home loans at people like us who were living paycheck to paycheck, times were good and it seemed like the double-digit salary hikes for just sitting on your ass at work would go on forever!

Every one was only talking about 'real estate investments'...but no one told us that land appreciates, not flats in Bangalore (except on paper!). By the grace of my parents, I already had (and still have) a roof over my head in the city I would work, but if not, there is no doubt I would have taken a home loan and bought a flat. Like so many of my friends, most of whom just finished closing their loans (and this is with both spouses working!) and several of them who don't even live in their 'dream' flats anymore because work and kid's schools have taken them across the city and in many cases to different cities! Not to mention the really, really sub-standard construction of these flats from even the 'prestigious ' builders and their 'premium' projects.

So that's some sterling advice!

In fact, I'd go a step further and say to salaried people - for big ticket expenses, think if you want it because you need it or because society expects it from you and your 'status/family status'. A huge wedding (after 11 years I can tell you I don't even remember what happened and we haven't even looked at the damn album in at least 5 years!), a bigger car when the present one is doing just fine, and (this is going to be really controversial but not enough people will say it in our society, so more people have to...) kids!

(Again, not saying shun all of this, but just think if it's you who wants those things in life, or if you are just complying with society's 'expectations' of you, that's all. You could save a ton of money that will be very useful during a lengthier retirement, with life expectancy rising.)

[rajushank84]

Originally Posted by Red Liner

Move to the mountains with your family, grow your own veggies, walk everywhere, breathe fresh air, drink the best water and eat good nutritious food.

This is a good retirement plan as opposed to sitting in some godforsaken city and trying to amass paper money for the rest of your short meaningless life.

Not sure how I missed this thread, but this is solid advice, I am thinking about doing this sooner instead of waiting for retirement. Tech enables a lot of things that haven't been possible before, particularly in terms of remote work/enterprise.

I don't agree that this means terrible schooling, backward thinking and lack of healthcare facilities. It depends on the location. I hear "city" folks (who live in the center of the city) voice similar concerns about living 20km away in suburbs, simply because they aren't used to it. Sometimes, the hospitals and schools in suburbs are actually better than the ones next to the breadboxes we refer to as living quarters in cities. There is this notion that "city life" is "normal" and that country living is something "different". When we think about it, it is the other way around. We are still an agricultural society, that is our root, not the concrete jungle.

I am looking at places close to the western ghats. Some of those cities have not only top-notch facilities but also not different from metros in terms of liberal thinking.

I am looking at the Nilagiri hills and surrounding areas, for example:

• This area has always been an education hub since British days, as it used to be a summer capital and they established many boarding schools
• Nearby cities like Coimbatore have all the healthcare facilities one would need
• Being at a meeting spot of three states, the people there tend to be multilingual, almost everyone is an immigrant, and people are friendly (I have lived there for close to a year when I was a child and still have people living there, so this is not a complete outsider's perspective).

Negatives:

1. Landslides do happen. But that is more a concern higher up in the hills. I am looking more at foothills / Coimbatore outskirts than actually in the hills.
2. Being away from family. I see this as a mental barrier too. Do we see it the same way if we talk about living in California away from family? I see this as a mental bias more than an actual constraint.
3. High possibilities of getting bored. I think this varies from person to person, but I don't see myself getting bored around a lot of hills and a motorcycle in sight. I can think of dozens of other things too. But I am the sort of person who spends a lot of time alone and enjoys it. If your idea of fun is limited to one or two things that are possible in an ultra-urban setting, I guess your mileage may vary.

I am thinking about Andaman also. After ages of connectivity wors, the govt has actually put fiber optic Internet under the ocean from the mainland. This used to be the only major negative, aside from a couple of things like cost of things brought in from the mainland. I have some extended family living there too. Personally I would end up preferring to stay in the mainland - especially a place with decent facilities - but throwing this out there, people live on islands perfectly well too, in fact one of my extended relatives is a doctor himself. But I don't know, I may get tempted to pick Andamans over the western ghats. I mean, it is island life..

[GutsyGibbon]

Originally Posted by Saanil

It is possible that 30-40 years ago, majority of the employment was in the public sector so retirement planning was done automatically without any explicit mechanism (salaries were low probably because a part of it was deducted for future pension payment).

That was a generation that truly thrived. Many public sectors in the early 90s paid all/most of the salary of the remaining service. Several people took these golden parachutes.

For us in the private sector, we need to use the growth in the stock market to create golden parachutes of our own, cash out and possibly explore newer opportunities. I see things like FIRE as a second life. Much of the expenses in retirement depends on what one is going to do with the rest of their productive lives. Move to the mountains and do what? farming? A friend just moved from the US straight to a town near Udupi, bought 25 acres and is going all in. With such huge investments, his use of the term FIRE is a misnomer.

My parents, who took the golden parachute did nothing. I mean nothing that needs money. Laughter club, meditation, and solving global issues through WhatsApp university I need to literally beg them to spend money. For such a life, I beg to differ on all the big retirement corpus numbers floated here.

[rajushank84]

Originally Posted by GutsyGibbon

I see things like FIRE as a second life. Much of the expenses in retirement depends on what one is going to do with the rest of their productive lives. Move to the mountains and do what? farming?

Online work! At least that is my plan. I don't ever plan to FIRE by the textbook definition of it, because it is pointless. Also I hang out at various FIRE forums, it seems like the majority of posters are in the same boat. It is not about retiring early, it is about earning the luxury of working in one's areas of strength rather than what is practically income-fetching.

The fruit of FI is time. Doing nothing with it is a waste of earning it, as I see it.

When I was in early school I used to write exams to my minimum required level. I used to know more answers but decided that writing them wasn't worth my time. Instead I used to write just enough to pretend that is all I know, just enough to "pass", and then go out play in the trees (mainly picking tamarind and "naaval fruit" - jaamun, I think - before the rest of the class was out, sometimes climbing trees).

I see FIRE as something like that. In the exam of money-making, I am putting in my minimum and then I'm out. I'm not interested in scoring more and more marks. But after doing all that, if I don't go out and play then what is the point? That "play" is what I refer to as online work. Is this FIRE by definition? I don't know, and really don't think it is important to define it one way or other.

[rjainv]

Sorry guys, what is FIRE here ?

[SmartCat]

Originally Posted by rjainv

Sorry guys, what is FIRE here ?

Financial Independence, Retire Early!
https://en.wikipedia.org/wiki/FIRE_movement

The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement with the goal of gaining financial independence and retiring early. The model became particularly popular among millennials in the 2010s, gaining traction through online communities via information shared in blogs, podcasts, and online discussion forums.

Those seeking to attain FIRE intentionally maximize their savings rate by finding ways to increase income and or decrease expenses. For instance, buy a motorcycle instead of a car, truck or house. The objective is to accumulate assets until the resulting passive income provides enough money for living expenses throughout one's retirement years. Many proponents of the FIRE movement suggest the 4% rule as a rough withdrawal guideline, thus setting a goal of at least 25 times one's estimated annual living expenses. Upon reaching financial independence, paid work becomes optional, allowing for retirement from traditional work decades earlier than the standard retirement age.

[poloman]

Originally Posted by DigitalOne

Retirement planning advise that I give my younger colleagues and relatives. This is mainly for 25 - 35 years old city dwellers.

Do not buy a flat.

Contrarian advice from some one who is in mid forties. Buying a house is a highly personal and emotional decision. Unless one is blessed with good inheritance, going with out a roof over your head till 45-50 can be a highly risky decision. I strongly believe the purpose of the house is to bring up your children in a safe and consistent atmosphere and the purpose is defeated if you buy a big house when they move out. When you retire always better to settle in a manageable house in terms of maintenance and facilities.

I have made three property purchases in life till now. 1200, 2BHK apartment 12 years back bang in the middle of IT corridor at a sum of 24L. Yes those were the prices 12 years back in places like Marathahalli. This is 165 unit complex with all amenities. Closed the loan of 20L with emi 17K in 6 years. Then purchased a 10 cent property in my home town at 15L with a small personal loan and savings around 8 years back. Lastly made a plot purchase on suburbs of Bangalore for 35L outright where I may build a house and move soon. The 2BHK apartment can easily yield a rental return of 25K per month.

I am just an average IT joe like many others and have not used any other funds than my own personal savings for these purchases. I have a healthy corpus even after these real estate investments. So it is not very difficult to achieve the goals if you strike right deals at the right time and maintain financial discipline.

At 45-50 you will have to incur other priority expenses like education and marriage of children and the house purchase may not materialize that smoothly. One of the greatest fear one can have is not having a roof over your head in your sunset years.