Mr. Thomas visited us to evaluate his retirement readiness and plan for his life after retirement. He was 53 years old and was planning to retire within a year’s time. He had worked as an engineer through his working career and was retiring comfortably – i.e. with a net worth of Rs. 34 lakh, a house to live in Thane. He has one daughter – now settled in Bangalore after her marriage. He has no liabilities and is proud to have managed his finances carefully thus far. However, what worries him now is how long will his retirement corpus last and how big should it be. He is wondering if it would make sense to postpone retirement by another year or so if the required corpus is higher.
We analyzed his inputs and figured out that his cash expenses were a modest Rs. 15,000/- per month. His assets could earn him about 10% with a fairly conservative portfolio. This translated into a monthly income of roughly Rs. 25,000/-. We projected the income expenses as well as assets for another 25 years with various scenarios of inflation and asset returns. We inferred that after accounting for inflation, he will not have to dip into his principal till another 18-20 years. We checked with him if he had any bequeath requirements, which he did not. Given this, with fairly conservative assumptions, he could expect his retirement corpus to last for another 30-35 years still leaving behind Rs. 10 lakh at the end of it. He was comfortable with this picture.
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