If you withdraw 4% every year of your retirement money, it will last you 25 years.
Because 4*25=100% of your retirement money.
Lets say you retire at 60 so this should last you till 85 yrs - Life expectancy in India is around 75 so you should be ok.
So you need 25 years of salary which is 300 months of income.
So this means if your monthly expenses are Rs 25,000 a month then all you need to retire is
25,000* 300= Rs 75,00,000 (75 lakhs)
If your monthly expenses are Rs 50,000 you need Rs 150 lakhs or Rs 1.5. crores
Please note your annual expenses should include all expenses including health, travel, food, petrol, rental, shopping or any other expenses you may have. The simple way to find your monthly expenses is go into your bank accounts & find out what you spent in the year & divide by 12.
Now this assumes your money grows as much as inflation. So all you need to do is to find an instrument which equals or beats inflation. Now property will not be a good instrument because it will only give you 2-3% rental returns & you cant sell 4% of it every year.
Fixed deposits may not be a good option because they may not be able to beat inflation. If inflation is at 10% a fixed deposit may only give you 6-7% returns. Stocks & mutual funds will be the best option.
Now the answer to months of salary required will always be 300 as long as you can beat inflation.
Your expenses of course will vary. But that does not change the answer.
Thoughts?
