50 plus but not financially organized – can you afford to retire?

I had a rather interesting conversation with a friend the other day. We go back a long time, to our days in college, though of late our interactions are in the cyber space only. He had read my blog and wanted to know why I did not write about people who were 50 and wanted to retire for a variety of reasons. When I gave him the idea of reading my posts on financial independence and generation of passive income he said – ” I know you had planned it out but what about the many people who have not planned it out but want to do it suddenly. They may also not be as organized as you are.”

Well, everything in life really cannot be planned and it is a fact of life that voluntary or involuntary separation from your job at an age of 50 plus, will make it rather difficult for you to get an equivalent job that you will be happy doing. At this stage, the normal question to come up will be, “do I have enough to just chuck it all?”. Let us see whether you do or not. For the purpose of this post, I will be making certain assumptions on the profile of the person. When you are trying to apply this situation to your own, you can make the suitable modifications.

  • Ankur Anand is 52 years old, his wife Seema is 48 and his only child Karishma is 22. 
  • Ankur works in an IT MNC, Seema is a homemaker and Karishma has just completed her Engineering and has plans to get into an MBA program in India from one of the top IIM s.
  • Ankur has his own apartment in Bangalore which is paid for. His outstanding goals apart from retirement are Karishma’s PG education that may cost about 20 lacs and her marriage, 5 years away costing 15 lacs in today’s price.
  • He has invested in MF and stocks but not for any particular goal. These portfolio values are currently 1.2 crores and 80 lacs respectively. He has PPF and FD totaling about 60 lacs.
  • His PF and Gratuity along with stock options will come to about 2 crores if he stopped working today.
  • He has looked at an expenditure of 6 lacs per year for household expenses and another 2 lacs per year for vacations and other contingencies.

Can Ankur retire today if he wanted to? To answer the question we will need to look at his current goals and retirement expenses and then compare it to his available money. If this basic test holds then the deployment of his money to get an amount of passive income per month is the easier part. So let us look at the goals:-

  • Karishma’s MBA will cost 20 lacs as it is pretty much immediate.
  • Her marriage will cost 15 lacs in today’s money.
  • Ankur expects to live for another 35 years and his current expenses are 8 lacs per year. At zero real rate of return he will be needing 2.8 crores over the 35 years.
  • His total money requirement is therefore 3.15 crores.

Now adding up all his available assets we see that Ankur will have an amount of 4.6 crores if he converted everything to cash today. Therefore he should be quite OK if he retired today. The cushion he has will let him dpend some money on any asset he may want to buy later and for contingencies of living beyond 35 years in retirement.

Now let us look at how the money is to be deployed. He can follow the simple strategy given below:-

  1. Start by withdrawing from PPF and FD while keeping equity intact. Money from PF etc can be put into debt funds which he can start to redeem after PPF / FD are over.
  2. Equity can be shifted partly to debt in the good market years and redeemed after 1 is over. 
  3. Residual equity can be touched only when all debt is exhausted.

Ankur therefore is pretty much set to chuck his job and do whatever he pleases to do. Are you in a similar position to him? If you are 50 and above, I strongly suggest you check it out. You may be quite comfortable with the idea of retiring at 60 but it never harms to check out your readiness.

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