My income is Rs 2 lakh a month. I have a monthly expense of Rs 80,000, including a home loan EMI of Rs 44,000. I have investments in ELSS (Rs 10,000 per month) and some investments of around Rs 2.30 lakh in the stock market, which I have kept for a long term plan. My query is: if I want to retire by 45, how much should I invest? I am 38 years old.
–Nimai Yagnik
Harshad Chetanwala, Co-Founder, MyWealthGrowth.com, responds:
Many factors can play a role in planning your early retirement at the age of 45 years. If you plan to retire early, you will have to plan the repayment of the home loan before reaching that stage. From the details mentioned in your query, you have the potential to save and invest Rs 1.20 lakh every month as the monthly expenses of Rs 80,000 also include EMI. The monthly expenses may vary depending on the city you live in, lifestyle and other monthly mandatory commitments. A monthly expense of Rs 36,000 may not be optimum and would suggest adding miscellaneous expenses. If we consider Rs 50,000 as your present monthly expenses, including the miscellaneous expenses then at the time of your retirement the same will be Rs 75,000 with an inflation of 7%.
To evaluate retirement corpus, we also have to factor in post-retirement inflation, the growth rate of your retirement corpus and life expectancy. For working out on your early retirement plan have considered the inflation of 7%, the portfolio growth rate of 9.5% p.a. (as the investment will be diversified across equity and debt for regular monthly withdrawal) and life expectancy of 85 years. Considering all these factors you will need a corpus of Rs 2.35 crore at the age of 45 years as your retirement corpus. To achieve this objective in seven years, you will need an investment of Rs 1.80 lakh every month, assuming a 12% return from the portfolio. Since you can invest a maximum of Rs 1.20 lakh, you may have to reconsider your plans to retire at 45, and extend it by a few years.
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