Financial Independence at 41 – A reader query

India is truly a land of great contrasts. On one hand we keep hearing about difficulty in getting jobs and job losses in a variety of sectors. On the other hand we see people just coming out of colleges getting salaries that their parents did not get even when they retired. The vast majority are forced to work till very late in their lives, yet we have some who plan to retire at a relatively early age. In this post I wanted to share about a reader who wanted to check with me as to whether he could retire at 41.

This person, let us call him Ravi, is atypical in many ways. He is currently employed and is 27 years old. Even at this young age he is clear that he would like to pursue his passion seriously when he is 41. So much so, that he is unwilling to get married and start a family, which he feels will hinder him from achieving his goals. His parents are also self sufficient and have even contributed to his NPS till he got started in his job. The objective of giving this background is simple – I want readers to understand that not all of us can look at this plan, most of us have families and will need a whole lot more to run our lives as well as to retire.

With that proviso, let us look at Ravi’s current situation :-

  • His current NPS balance is 9 lacs. We will assume he keeps it at this and lets it grow at a rate of 10 % every year. He will have 34 lacs in 14 years time.
  • His monthly surplus is 60000 Rs today. We will assume it stays at this level for 6 years and then goes up to 90000 for the rest of the period.
  • We will assume that his Equity to Debt allocation is 60:40. So for first 6 years he will invest 40000 per month. This will lead to 1.7 crores in 14 years at 12 % return annually.
  • For next 8 years he will invest 58000 in equity every month. The extra 18000 for 8 years will add up to 29 lacs at 12 % rate of return.
  • For the debt allocation, these figures will be 62 lacs and 16 lacs at 8 % annual return.
  • Ravi’s total corpus when he is 41 years will therefore be 3.12 crores.

Let us now look at how much Ravi will be needing :-

  • As he lives in a smaller town his current expenses are only 25000 Rs per month or 3 lacs annually.
  • At 41 we can assume this to be in the region of 7 lacs annually.
  • Let us assume Ravi will live for another 45 years from 41. At a conservative level his corpus should be 45 x 7 lacs or 3.15 crores.
  • How should he deploy his money so as to get a passive income of 7 lacs annually? In this case as he has enough money, so keeping it in any instrument which matches inflation will suffice. However, as a good financial practice he should deploy his money as suggested in some of my blog posts earlier.

So, Ravi can retire at 41 which is great for him. What works for him is lesser responsibilities and ability to invest a lot at an early age. His parents have also contributed to his NPS which adds up. People with wife and children will find it really hard to retire at 41. However, something like 50 is still quite possible.

I will be happy to receive and answer any queries that the blog readers may have.

 

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13 thoughts on “Financial Independence at 41 – A reader query

  1. His basic unwillingness to get married and start a family is something theoritical. In that case he will not even require 3 crores corpus… his responsibilities are minimal and as long as life dont give him any surprise he need not even bother to plan this much.. live life free…

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    • Not really – he will need money when he is not earning. If he lives just as he pleases then he will have to keep working till his retirement age. The whole idea is to not work after 41. Also, marriage and having children is the choice of an individual. In his case he has chosen not to have these. That does not mean he will not have other interests such as travel etc – and these do cost a fair amount of money too !!!

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  2. Dear Rajshekhar,
    I had posted a comment here (twice) a short while ago, but it hasn’t appeared here.
    There wasn’t any message or indication that the comment is awaiting moderation.
    If it is indeed awaiting moderation, please approve one of them, and delete the other along with this one.
    If it hasn’t been registered at all, please let me know and I’ll try once again.
    Thanks.
    KV

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  3. I am just wondering as some points aren’t clear to me.. so does this mean he can retire at 41 and then marry?
    Cant he deploy 3 crores in plain FD @ 7% and get around 21 Lakhs annually, which he can then deploy partly into equity, even savings, to grow his corpus.

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    • Yes, he can keep the money in FD but that will mean a lot of taxes. When you are retired you do not want to pay any more taxes than what is absolutely necessary. There are many ways to structure the deployment in a tax efficient manner, read some of my blog posts on this.

      As for marriage I do not think Ravi has plans to go for it, either now or after he is 41. Different priorities for him and he seems happy to make the choice.

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  4. It looks like WordPress registered one of the first two comments, and is not permitting me to post it again!
    The message I get is:
    “Duplicate comment detected; it looks as though you’ve already said that!
    « Back”
    So I’m writing this initial explanation to see whether that does the trick. 🙂
    ——————————
    .
    .
    .
    Quite an interesting post!
    Would like to share my thoughts about this hypothetical person / situation.
    I am not being judgemental or critical about people’s choices.
    Just sharing my opinion — which may sound old-fashioned or even prudish in today’s modern age.
    At this young age, Ravi is quite clear that he does not wish to marry and have a family.
    That’s not surprising. I know a few people who think similarly about marriage.
    However, having seen life as a married person, imho after 45 (sometimes even before that), a person does start needing someone with whom he / she can live without being judged, and share their joys and sorrows.
    I know there may be many who will disagree with me on this too ( 😉 ), but I know a few ‘happily unmarried people’ who sometimes show signs of needing a companion.
    And as you get older (beyond say, 50, 60, 70) the need for companionship will probably grow even more.
    Perhaps, just perhaps, Ravi could consider, and explore the possibility of marrying a like-minded young lady, at least as far as not wanting to have children is concerned.
    Time is on his side — and since he would be marrying a lady who is not interested in having children either, he need not worry about the lady’s biological clock ticking away either.

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  5. I oon’t see much problem with the calculations but I would expect that a decent salary and the low cost of living in Indian means FI is relatively easy if you want it.
    Excuse me for my cultural insensitivity – but don’t you have some idea that your kids will pay for you?
    That’s what we are told in the UK about Indians – so at 41, you might be able to send your kids out to earn money for you.

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    • Thank you for your comment. You are right, children paying for their parents was the norm or expectation earlier. However, that is changing fast, especially in urban India today.
      Most readers of my blog will really need to plan for themselves and cannot or will not want to depend on their children. At 41 you certainly cannot send your kids to earn money for you 🙂 They will hardly be 12-15 years old !! Cost of living in India is not really low today compared to UK.
      Do not mind my saying this – you do not seem to have any idea of how India has changed and are stuck with decades old mindsets. Need to have a huge dose of reality check and reinvent your thoughts as far as India is concerned.

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      • point taken – I have a lot of indian friends and they tell me how life is different from past generations, so I was just testing to cultural waters.
        Funny what you say about the cost of living not being lower, I would have thought that things like housing – but maybe that’s not the case (like many places)

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      • Just a small observation about @GentlemansFamilyFinances comment
        “… at 41, you might be able to send your kids out to earn money for you.”

        Ravi doesn’t wish to get married and start a family, as he feels that will hinder him from achieving his goals. So the question of his kids earning money for him does not arise.

        And @Rajshekhar’s observation also rings true…
        “Most readers of my blog will really need to plan for themselves and cannot or will not want to depend on their children.”

        What was probably true just one generation ago (kids taking care of parents in their old age), will most likely not be the case from this generation or, at most, the next.

        With consumerism, materialism, fast lifestyles, changing values, etc., it makes good sense for today’s parents to ensure their own financial stability and independence, rather than depending on or hoping that their children will take care of them in their old age.

        The “pragmatic” thinking of today’s kids is:
        “My parents did their duty by raising me, educating me, and setting me up for a good future.
        However, I don’t feel that I owe them anything in return, since they did it of their own volition.”
        Lucky are the parents whose kids think differently, and consider it their duty and responsibility to take care of their parents.

        This is *not* to say that family ties are broken once the kids become financially independent and go their own way.
        Just that in money matters, today’s parents and kids are very clear what to expect in their old age, and plan accordingly.

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