How much Money Do I need to retire?
That’s one question which I have been thinking about for sometime now. And I am sure most of the folks above 30 would have given it a thought at-least once. It’s probably the most important question after “How do I remain happy?”
Though it’s easy to model retirement calculator in excel but with so many assumptions over such long duration (typical of 25+years), things become tricky. Therefore it is better to be conservative in modelling and put more amount in investments so as to build a large corpus; build that margin of safety. Ultimately we don’t want to be in a situation where we find that our so called retirement corpus is actually just a piggy bank amount.
Since assumptions are involved in any kind of modelling, I have also taken certain assumptions for building the Retirement Calculator India Excel. Here is the list of assumptions –
- Inflation: Inflation is the beast which inflates our expenses and one always run the risk of underestimating it. Therefore it becomes super crucial to get this number right. In my retirement excel calculator, I have taken it to be 6%.
- Fun Activity: If you really want to see the power of inflation, try playing with the number and see the impact on Retirement Corpus. For me a single percent point change has resulted in the jump of Rs. 2 crores. Scary Isn’t it?
- Pre-Tax Return on the Retirement corpus: This is how much you would be making (annually in %) on your retirement corpus. Your portfolio mix will have a huge bearing on this number. Besides your portfolio mix will also be not constant throughout the retirement period. It should change from equity to debt as preservation of capital will become more important as you age. In my case since I would be retiring very early, I can afford to have my portfolio mix tilted in favor of equity (and hence higher return) but as I said earlier I want to be ultra conservative. I can work hard for these remaining 11 years and build up higher corpus than be sorry later. That’s why I have assumed Pre-Tax Return to be 8% but you are free to change it as per your liking.
- Fun Activity: Change Pre-Tax return number from 8% to higher numbers like 9% or 10% and see your retirement corpus shrinking down. For me a single percent point increase in the return reduces the retirement corpus by Rs. 1 Crore. Beautiful Isn’t it?
- Tax Bracket: Once again it is taken on the conservative side as 30%. Most probably it would be 20%. Feel free to change it.
Once we are through with the assumptions, let’s have a look at other numbers which you will have to fill.
- Current Monthly Spend: This is where everything starts – Your Current Monthly Expense. Put down every small expense in the sheet. You will be surprised to learn that these small expenses put together make a very large pie of the actual expense. Hence put down every single last penny.
- A small tip: Don’t forget to factor in annual expenses like insurance premiums and car maintenance. Also add some misc expenditure as margin of safety.
- Luckily for me, there is no rent expense as I live with my parents. My son is too young to be put in a school therefore I save on the education expenditure also. But (and it’s a BIG BUT) my other expenses are HUGE. I spend around Rs. 18,000/month on home helps and Rs. 20,000/month for travelling and vacationing.
- My current monthly expense comes out to be Rs. 122,000
- Life Expectancy: Fitter you are, longer you live. Put a reasonable number here. I plan to live till 75 years hence have put that down in the sheet at the moment.
- Retirement Age: I plan to retire by 45. What’s yours retirement age?
- Ending Portfolio: Would we want to leave behind something for our children? If yes, then put a number there else make it ZERO. Currently it is set at Rs. 20,000,000 (2 Crores).
One thing is missing in this Retirement Calculator Excel. Can you guess what?
There is no arrangement done for children education or marriage. If you want to arrange for that also, then I would recommend you to start a SIP right away and especially if both these milestones are at least 10 years away.
Before you download Retirement Calculator India Excel, remember this for your own good –
It is better to be Conservative than Sorry!
Now without further ado, here is is the
- This calculator assumes that your monthly spend would be taken care by only the interest on the retirement corpus. There is no extra income.
- This excel retirement calculator only serves the purpose of a template. Please consult a qualified retirement planner before embarking on this journey.
Do let me know in comments if anything is not clear in the sheet.