Short answer: NO.
Read on to know why. If you retire at age 40 in 2020, with a life expectancy of 80 years, you’ve got 40 years of post-retirement life. You mentioned that the 1 crore is generating ₹63,000 as interest every month. That’s ₹7.56 lakhs annually. On the other hand, your monthly expenses are ₹25,000, summing up to ₹3 lakhs annually. So, every year, you’re saving up an additional ₹4.56 lakhs, which can be reinvested.
Now, comparing this to the ‘safe withdrawal rule’, it advises retirees to withdraw no more than 4% of their portfolio in the first year of retirement, adjusting the withdrawal every subsequent year for inflation. For a corpus of 1 crore, this equates to ₹4 lakhs a year. At first glance, it seems you’re on track, as your expenses (₹3 lakhs) are less than the safe withdrawal rate.
However check these numbers, after considering the big horseman, INFLATION. Assuming its 7% per annum, its clear from the chart that you will run out of the corpus before you become 78 years old. Here’s where the depth comes into play: The ‘safe withdrawal rule’ is derived from global studies and benchmarks, like the Trinity Study. Factors like inflation, unforeseen medical expenses, lifestyle upgrades, and potential investment shifts can make a substantial difference in real-world scenarios, especially in the dynamic Indian economy.
So the corpus is not enough unless you change your asset allocation mix.
Using the LSG framework by Jama Wealth, you must consider:
- Liquidity: Ensure you have quick access to funds for emergencies.
- Safety: Protect your principal amount. Don’t chase high returns with high risks, especially if this is your retirement corpus.
- Growth: Your investment should grow at a rate that at least beats inflation.
Warren Buffett once wisely remarked, “Do not save what is left after spending, but spend what is left after saving.” To sum up, while your 1 crore might seem sufficient at first, it’s essential to account for rising costs, unforeseen expenses, and the changing dynamics of the Indian economy. If you need a trusted advisor to navigate these waters, consider Jama Wealth’s PMS services and associate investment advisory services.
