Re: [silk] To retire or not - that is the Q.

[Deepak Shenoy]

>
>
>
> Hypothetically, say that translates into 25K + 5K + 5K + 5K= 40K per month.
> Need to have a corpus that gives you this monthly amount with even
> conservative investments such as FDs. We're talking about a 8-10% ROI per
> annum. So, in this example, you need to have a corpus of 50 - 55 lakhs. If
> you have a good financial planner and a higher risk appetite, your returns
> can be higher. Hope this helps.
>
>
You will need a lot more. So I have this post: how much FY money do you
need?
http://capitalmind.in/2014/09/how-much-is-enough-to-say-fy/

and then I have this thingy:
http://capitalmind.in/2016/08/saving-retirement-much-enough/

What you need is a lot more because
a) inflation is much bigger than 5K
b) you need to plan to live to age 90. Just because.

Now I assume you're the only person in your household with revenue, so you
 may have to plan cash flow for say 50 years.

You need money that gets you this 8% return and yet, lasts you all the way
for 50 years. How much do you need?

The Answer is about Rs. 1.22 crores. (Assumptions: you get 8% on your
money, you spend 40K a month now, inflation is 5% a year).

The way it works is

Year 1 you have 1.22 cr. on which you make, at 8%, about 9.75 lakh, or
which you spend 4.8 lakh, and the rest stays in your capital which goes up
to 1.27 cr.
Year 2 you have 1.27 cr. on which you make, 10.16 lakh, you spend 5.04 lakh
(remember, 6% inflation) and your capital goes up to 1.32 cr
and so on

your capital keeps going up for 35 years, till you have about 3.2 cr. and
in the last 15 years, it will plummet to zero (in the 50th year from now)
This capital also acts as an emergency buffer.

I know there are variables, so you can calculate different ways to get
there - perhaps you sell your house when your daughter's 18 and then move
to a smaller place. Maybe you reverse mortgage the house when you're 60 to
get some money from a bank. Etc. I had a calculator on how much you need,
it's at http://capitalmind.in/2006/10/how-much-do-you-need-in-order-to/.

Now, here's the other thing. If you're planning to build cash flow, don't
use FDs. They create taxable income and at large corpuses become very
unwieldy. THere are other instruments - I can give you more details if you
want to explore. These will both save you tax and perhaps create a "kicker"
income if rates continue to fall (a key risk here - imagine the person who
did this calculation in 1980 in the US - interest rates of 12% - and today
the FD rates are like 0.5%)

Don't worry if you don't have this kind of money right now - there are
not-so-difficult ways to get there if you plan it a little more. You don't
want a precise plan - you need lots of buffers - but you need an idea that
this takes me to age 90. The big thing I would imagine you haven't
considered is that your child will need a lot more money as she grows up
and that you will need a lot more money for travel which I'm thinking is a
good part of your bucket list.

Re: [silk] To retire or not - that is the Q.

[Bhaskar Dasgupta]

Don't forget nursing home expenses or the fag end of life medical care. It's 
frikking expensive and eyewateringly big. 

On 16 Sep 2016, at 11:37, Deepak Shenoy  wrote:

>> 
>> 
>> 
>> Hypothetically, say that translates into 25K + 5K + 5K + 5K= 40K per month.
>> Need to have a corpus that gives you this monthly amount with even
>> conservative investments such as FDs. We're talking about a 8-10% ROI per
>> annum. So, in this example, you need to have a corpus of 50 - 55 lakhs. If
>> you have a good financial planner and a higher risk appetite, your returns
>> can be higher. Hope this helps.
> You will need a lot more. So I have this post: how much FY money do you
> need?
> http://capitalmind.in/2014/09/how-much-is-enough-to-say-fy/
> 
> and then I have this thingy:
> http://capitalmind.in/2016/08/saving-retirement-much-enough/
> 
> What you need is a lot more because
> a) inflation is much bigger than 5K
> b) you need to plan to live to age 90. Just because.
> 
> Now I assume you're the only person in your household with revenue, so you
> may have to plan cash flow for say 50 years.
> 
> You need money that gets you this 8% return and yet, lasts you all the way
> for 50 years. How much do you need?
> 
> The Answer is about Rs. 1.22 crores. (Assumptions: you get 8% on your
> money, you spend 40K a month now, inflation is 5% a year).
> 
> The way it works is
> 
> Year 1 you have 1.22 cr. on which you make, at 8%, about 9.75 lakh, or
> which you spend 4.8 lakh, and the rest stays in your capital which goes up
> to 1.27 cr.
> Year 2 you have 1.27 cr. on which you make, 10.16 lakh, you spend 5.04 lakh
> (remember, 6% inflation) and your capital goes up to 1.32 cr
> and so on
> 
> your capital keeps going up for 35 years, till you have about 3.2 cr. and
> in the last 15 years, it will plummet to zero (in the 50th year from now)
> This capital also acts as an emergency buffer.
> 
> I know there are variables, so you can calculate different ways to get
> there - perhaps you sell your house when your daughter's 18 and then move
> to a smaller place. Maybe you reverse mortgage the house when you're 60 to
> get some money from a bank. Etc. I had a calculator on how much you need,
> it's at http://capitalmind.in/2006/10/how-much-do-you-need-in-order-to/.
> 
> Now, here's the other thing. If you're planning to build cash flow, don't
> use FDs. They create taxable income and at large corpuses become very
> unwieldy. THere are other instruments - I can give you more details if you
> want to explore. These will both save you tax and perhaps create a "kicker"
> income if rates continue to fall (a key risk here - imagine the person who
> did this calculation in 1980 in the US - interest rates of 12% - and today
> the FD rates are like 0.5%)
> 
> Don't worry if you don't have this kind of money right now - there are
> not-so-difficult ways to get there if you plan it a little more. You don't
> want a precise plan - you need lots of buffers - but you need an idea that
> this takes me to age 90. The big thing I would imagine you haven't
> considered is that your child will need a lot more money as she grows up
> and that you will need a lot more money for travel which I'm thinking is a
> good part of your bucket list.

Re: [silk] To retire or not - that is the Q.

[Vinayak Hegde]

On Fri, Sep 16, 2016 at 4:07 PM, Deepak Shenoy
 wrote:
> Now, here's the other thing. If you're planning to build cash flow, don't
> use FDs. They create taxable income and at large corpuses become very
> unwieldy. THere are other instruments - I can give you more details if you
> want to explore. These will both save you tax and perhaps create a "kicker"
> income if rates continue to fall (a key risk here - imagine the person who
> did this calculation in 1980 in the US - interest rates of 12% - and today
> the FD rates are like 0.5%)

Yes. Would be interested to know what are the different alternatives.
I am guessing bonds
and Equity mutual funds are one avenue. But I am guessing you have a
lot more options.

Thanks
Vinayak

Re: [silk] To retire or not - that is the Q.

[Rajesh Mehar]

>> 2) Hired a* professional "family office" investment consultant* to invest
>> and maintain this corpus. I enjoy the financial planning aspect of wealth
>> management, but my weakness is I hate paperwork - and this from a person
>> whose career was built on documentation! So for my own sanity, I decided
I
>> needed this service.

Sandhya: Could you please pass on the contact of this investment
consultant?



>

Re: [silk] To retire or not - that is the Q.

[Deepak Shenoy]

Here's one:
http://capitalmind.in/2016/06/video-park-money-save-80-tax-also-generate-cash-flow/

(This is a way to keep your money in a money market mutual fund and beacuse
of the way Indian tax laws work, you save about 80% compared to an FD, if
you only take out what you need)

Another is to use "dividend yield" stock portfolios for a 5 year or more
horizon (you could even use a div-yield index ETF but none exist in India).
In the longer term you might see this giving you a much higher return than
an FD. IN which case you'll have some money in a liquid fund for say 5
years, and some money in a dividend yield portfolio. Initially you drain
out from the liquid fund and later the kicker comes from the equity where
the dividend yield will probably be of the order of 10% per year or such.

You can use equity funds too or ETFs for longer term, but it's usually
difficult to convince someone to put their retirement kitty into stocks.

Another way is to buy rental income type of assets, like a house. But in
India this is a PAIN. You get yields of 2% and then they kill you with all
sorts of nightmares like someone forcibly occupying your house etc. Better
to buy a house abroad, in the west I think.

And then there are bonds - there are bonds that give you 10% over the next
10 years, with some good companies. (Hey even an SBI bond is currently at
8.5% till 2026) These may add additional income especially if you are in
the lower tax brackets.

There's other stuff as well depending on how complex you want it to get -
using options to generate income for the really math oriented, or low
priced plantation real estate or so on.

But obviously the simplest is to do a liquid fund, and then a standardized
stock portfolio


Deepak Shenoy
Capital Mind: Financial Macro and Market Analytics
http://capitalmind.in
Twitter: @deepakshenoy

On 16 September 2016 at 16:23, Vinayak Hegde  wrote:

> On Fri, Sep 16, 2016 at 4:07 PM, Deepak Shenoy
>  wrote:
> > Now, here's the other thing. If you're planning to build cash flow, don't
> > use FDs. They create taxable income and at large corpuses become very
> > unwieldy. THere are other instruments - I can give you more details if
> you
> > want to explore. These will both save you tax and perhaps create a
> "kicker"
> > income if rates continue to fall (a key risk here - imagine the person
> who
> > did this calculation in 1980 in the US - interest rates of 12% - and
> today
> > the FD rates are like 0.5%)
>
> Yes. Would be interested to know what are the different alternatives.
> I am guessing bonds
> and Equity mutual funds are one avenue. But I am guessing you have a
> lot more options.
>
> Thanks
> Vinayak
>
>