# How much money would you need to retire

A sample calculation on approximate amount needed to retire. There are many numbers thrown around 250 months expense, 25x-30x annual expense. While it can be tricky to pin a single target figure but an approximate amount can be calculated to give a sense of the amount needed.

Many would still continue to work even after reaching the required target but still it would be good to know the amount needed.

Current Monthly expense = 50,000 INR

Current Annual Expense = 6,00,000 INR

If the entire amount should be generated out of capital gains (capital gain is taxed in India at 10%) then the required pre-tax income to be generated should be = 6,00,000 / (1–0.1) = 6,66,667 INR ~= 700,000 INR

Using the Trinity study 4% rule, lets assume that our investment would grow such that 4% can be withdrawn consistently

Total required corpus = 700,000 / 0.04 = 1,75,00,000 INR or 1.75 Cr INR

This calculation is a very simplified sample and it represents the approximate amount needed as of now. If the drawdown is to start 10 years in future then the corpus amount will need to be scaled up using inflation rates.

Assuming average inflation rate to be 8%

Corpus needed 10 years from now = 1.08¹⁰ x 1.75 Cr = 3.78 Cr INR

While the 4% rule is not very conservative, there can be many factors which can provide cushion to this

- Lowering expenses
- Having own house, so that there is minimal recurring living expense
- Income from side gigs or freelancing
- Having sufficient Health Insurance and Term Plan
- Having investments with very low annual expense like Index funds
- Staying clear of any shiny new product with promised return of ~18% p.a. or such
- Lowering the drawdown rate to 3% or lower

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