As you know, I am on a mission to grow my savings to Rs.5 Crores in the next 11 years. This is a personal goal and is not very closely aligned to the traditional FIRE calculations of setting a retirement corpus. Here is how I decided on a goal of Rs.5 Crores and the calculations I used. Towards the end of the sheet I have added an excel file to show my assumptions and calculations as well.
My Two FIRE Goals
I set myself two targets. One target of Rs.3.5 Crores that I can achieve with my normal job and current savings rate. I have also set a stretch target of Rs.5 Crores which I will be able to achieve if I work extra hard, save more and also take up side jobs that earn me additional income to add to my FIRE savings. And if I get to meet the stretch target, it gets me closer to FAT FIRE, if not, I will be somewhat on a middle-class Lean FIRE retirement 😛
And I really want FAT FIRE
I personally am not one of those who go the Lean FIRE way (where you live a frugal life after retirement). I wish to have a somewhat luxurious lifestyle similar to what I am living at the moment. As such, my stretch goal of Rs.5 Crores as a retirement corpus should also give me enough returns month on month. So I get enough income post retirement to enjoy a lifestyle at par with my current one. I am accounting for holidays, insurance, maid and also that I will continue supporting my parents financially.
4% Rule of FIRE and Retirement Corpus
I did NOT use the 4% rule, while I believe it works in other countries where interest is lower and inflation is lower. In India I think we need to be a bit more conservative, perhaps a 3% rule. If you look at my excel file you will get what I mean. Instead of using the lazy 25X or 33X rules, I have manually broken down and calculated my retirement corpus amount and goals. For my goal of Rs.3.5 crores, my initial draw down is Rs.1,00,000 per month, around 3.4% of my FIRE retirement corpus. If I do manage to meet my Rs.5 crore target, then the 1 lakh draw down per month works out to about 2.4% which gives me a lot more room financially.
What will Rs.5 crores get me
So, if I am successful in saving up Rs.5,00,00,000 and do retire, what will this money get me? I am hoping to get an annual income of Rs.12,00,000 from this retirement corpus. That equals to Rs.1,00,000 per month to live on initially which as time goes will increase with inflation. As I will not be having any mortgages (I plan to close my home loan by then), this should be a good amount of money for me to live upon in Bangalore and enjoy a comfortable life. With 2 holidays per year, and if it is a good year on my investments, perhaps 1 of those 2 holidays will be an international holiday.
In the attached excel file, you will see my current expenses and a projection of my expenses 11 years from now at the time of my retirement.
• I am assuming that inflation will remain at a constant 5%
• I am assuming that my lifestyle will continue at the same level as it is today
• I have accounted for sufficient medical coverage for myself and my family in case of emergencies
• During retirement, I will continue working freelance and have side gigs which will give me modest income, this is more to keep myself occupied than for the money. I have not factored the money from this in my calculations.
• I am assuming that I will live till a ripe old age of 75, and as per my calculations, I will have funds covering me till the age of 77.
• I am assuming that the average tax I will pay during this time will be 20% of all my income with efficient tax planning
• I have not factored in all additional income I will earn in these 45 years as well as any windfalls I may receive
• I am assuming a consistent return of 8% on my investments
• I have not factored in my home (which I have a 13 year mortgage on) and other small assets, personal gold ornaments etc
• My expenses will definitely go down with age. I have not accounted for this
My FIRE Retirement corpus calculations excel file
Take a look at the calculations, feel free to point out any holes you spot or questions you have in the comments section below.
What if I meet with an accident? What if I get cancer? What if my kid does not get a job and ends up living with me? What if my kid turns out to be super smart and wants to go to Harvard?
Well, all of these what ifs can happen to anybody at any time. In my FIRE journey, if I come across one, I am a versatile person. I may have to start working again, or perhaps rent out a room in my house through Airbnb, or even start driving for Ola or Uber. I am one of those guys who has a backup plan for a backup plan. So I have considered these risks.
Throughout my retirement journey, I will not be idle. I will constantly re-evaluate my portfolio, and constantly re-adjust my calculations. If I see a red flag anywhere I will be quick to make a course correction.