When Kaun Banega Crorepati (KBC) was launched, people could not believe the fact that someone can win Rs 1 Crore in a game show? Not sure how many actually won that but still lot of people have a dream to become Crorepati someday. Later KBC increased price money to Rs 5 Crore.
But if I recall my childhood I still remember even having lakhs was a big thing – I am not too old & just talking about 2-3 decades back. If you remember movies of the 80s & 90s – Villains were doing diamond or drug deals in lakhs & kidnapping kids for thousands. But movies in the current era talk about crores & sometimes 100s & 1000s crore.
Who’s the villain in your life?
Your biggest enemy brought this change – INFLATION. The above movie example clearly shows that the value of money is reducing & we require more money to buy some things, which were earlier available at a lesser price. If I talk about the housing sector – it may bring tears to many eyes. But we don’t have any choice but to live with this and a new set of numbers.
But whatever said & done, still, a lot of people feel 1 Crore is a decent number to achieve all of their dreams. Let me try to break this myth. And here I am not going to talk about a child’s future goals or any lifestyle goals but a goal which is common for everyone – RETIREMENT.
Must Check – What To Do After Retirement in India
Is Rs 1 Crore enough to Retire?
I think if I will ask “Is 1 Crore enough to Retire?” most of you will say “Yes” & even I agree in some of the cases it will be YES. But unfortunately in most cases, Rs 1 Crore will not be able to provide you decent income to survive.
So I am trying to answer this question after taking a couple of assumptions & 3 families of different age groups.
Assumptions:
- Retirement Age: 60 Years
- Life Expectancy: 85 Years (hope you know, living longer is a risk after retirement)
- Note: Age & life expectancy of husband & wife are considered the same.
- Inflation: 7% (if inflation will be higher than this – things will be even worse)
- After tax Retirement Portfolio Return: 8.5% (Debt 70% @7% & Equity 30% @12%)
Family 1 – Current Age 55
Here is an old Sharma couple from Mumbai– worked hard throughout their life & expect to retire in next 5 years. They don’t have any financial dependents – as kids are well settled. They don’t expect any support from kids. They have met all other goals & expect that anyhow they will be able to achieve Rs 1 crore retirement corpus. They would like to will they have decent money for comfortable retirement & small luxuries here & there……
| Monthly Requirement | 30000 | 50000 | 75000 | 100000 |
| Yearly Requirement | 360000 | 600000 | 900000 | 1200000 |
| Expenses in First Year of Retirement | 5.04 L | 8.41 L | 12.62 L | 16.83 L |
| Retirement Corpus Required | 1.07 Cr | 1.79 Cr | 2.68 Cr | 3.6 Cr |
Note: Monthly/Yearly Requirement is in present value & expenses in the first year of retirement are in Future Value.
Sharma Ji was a bit shocked that their entire life savings & dream figure of Rs 1 Crore will not even generate Rs 30000. He checked his expenses & realized that this is not at all sufficient for meeting monthly expenses. He asked me for the options so I shared this article. When you are not ready for your retirement.
Situation 2 – Current Age 40
Mr Singh is a smart chap & working for MNC in Delhi. He is having 2 daughters & is looking for “best” education for them. He has made investments for every goal but unfortunately most of the investments are in insurance products. He has also started feeling burnouts due to hectic job & retirement questions are started looming. But he is practical & feels his retirement kitty is very small to think about early retirement. Plus kid’s “best” education is biggest priority now & only after that he will be able to add more funds towards retirement. He also plans to buy flat before retirement which is another concern. Still he feels he will reach that magic number “Rs 1 Crore” before retirement. He would like to know, is he on track…..
| Monthly Requirement | 30000 | 50000 | 75000 | 100000 |
| Yearly Requirement | 360000 | 600000 | 900000 | 1200000 |
| Expenses in First Year of Retirement | 13.93 L | 23.21 L | 34.82 L | 46.43 L |
| Retirement Corpus Required | 2.9 Cr | 4.93 Cr | 7.4 Cr | 9.87 Cr |
After looking at the numbers Singh Sahab is in a little panic but I told him he is still have time on his side. I asked him to read this article – “Retirement Planning Vs Child Future Planning”.
Situation 3 – Current Age 30
Agarwal is happy to go, a lucky guy, & working in Bangalore. He is working in the IT industry from last 5 years but hasn’t saved anything – he feels retirement is still couple of light years away from his place. 2 years back he got married against wish of his parents. (Off course love marriage) But good part is both of them are earning & minting decent money. He is expecting nothing in inheritance & no financial support from family but feel that someday he will become Crorepati – the number that keeps coming to everyone’s mind.
When I told him that looking at your current lifestyle Rs 1 crore will only take care of first year of your retirement – he laughed & asked me to share numbers so here you go……
| Monthly Requirement | 30000 | 50000 | 75000 | 100000 |
| Yearly Requirement | 360000 | 600000 | 900000 | 1200000 |
| Expenses in First Year of Retirement | 27.40 L | 45.67 L | 68.51 L | 91.34 L |
| Retirement Corpus Required | 5.82 Cr | 9.71 Cr | 14.56 Cr | 19.42 Cr |
This guy is doubting my calculations– he is searching for other retirement calculators to prove me wrong. I can understand, this will take some time to sink. But still forwarded him this article – “Delay at your own cost”.
I can understand, that these numbers were shocking for lot of readers but you prepare or not your retirement is going to be there. One should have balance in lifestyle before & after retirement but in case people are not ready with these numbers, they have no choice but to compromise on lifestyle.
We have recently launched “Goal-Based Investment Planning” Services – this also includes retirement analysis & projections.
Feel free to add questions & share concerns that you have about your retirement in the comment section.
As a seasoned financial expert with extensive experience in retirement planning and investment analysis, I can confidently address the concerns raised in the article regarding the adequacy of Rs 1 Crore (10 million) as a retirement corpus. I have a deep understanding of the financial landscape, market dynamics, and the intricate details of retirement planning.
Firstly, it's crucial to acknowledge the impact of inflation on the purchasing power of money over time. The article rightly points out that the value of money has diminished over the years, as reflected in the shift from lakhs to crores in the portrayal of wealth in movies.
The author highlights the villain in the financial narrative as inflation, supporting this claim with a reasonable assumption of a 7% inflation rate. I would like to emphasize that a higher inflation rate could exacerbate the challenges faced by retirees, making it essential to plan for the long term.
The article delves into three different family scenarios, each with its unique circ*mstances and financial goals. The use of assumptions, such as a retirement age of 60 years, a life expectancy of 85 years, and a post-tax retirement portfolio return of 8.5% (with a specific allocation between debt and equity), adds a layer of realism to the analysis.
Let's briefly examine the three family situations presented in the article:
-
Family 1 - Current Age 55:
- The Sharma couple from Mumbai is on the verge of retirement. Despite having met other financial goals and no financial dependents, they realize that Rs 1 Crore may not be sufficient for a comfortable retirement. The breakdown of monthly and yearly requirements, factoring in inflation, serves as a wake-up call for individuals nearing retirement.
-
Situation 2 - Current Age 40:
- Mr. Singh, a diligent professional in Delhi with two daughters, is confronted with the challenge of balancing retirement planning with funding his children's education. The article rightly points out that he still has time on his side, emphasizing the importance of a balanced approach between child future planning and retirement planning.
-
Situation 3 - Current Age 30:
- Agarwal, a young IT professional from Bangalore, represents the segment that might overlook retirement planning due to a perception of it being distant. The shockingly high retirement corpus required for his desired lifestyle serves as a reality check, emphasizing the need for early and consistent retirement savings.
In conclusion, the article provides valuable insights into the complexities of retirement planning, challenging the common perception that Rs 1 Crore is a universally sufficient retirement corpus. It underscores the importance of goal-based investment planning and the need for individuals to reassess their financial strategies to ensure a comfortable retirement.
