Wish To Live Life King Style When You Retire? Read This!   Mar 14, 2019

(Image Source: macrovector via freepik)

Nowadays, my Facebook feed is filled with either pictures of my friends getting engaged or married or having kids. So, I was really surprised to find a retirement planning post in my feed. (Kudos, Facebook analytics team!).

The viral post, written by a Texas resident, highlighted the man's idea to spend his post retirement life in a holiday resort instead of an assisted living facility. The man argued:

The average cost for a nursing home care was $188.00 per day, whereas in a resort or holiday inn, a combined long term stay discount and senior discount costs $59.23 per night. Breakfast is included and some of them have happy hours in the afternoon. If another $40.77 per day can be accounted for healthcare and dinner, then for around $100 per day, an average individual can stay in a nice hotel, eat 3-star hotel food, as well as utilise the hotel's medical facility in case of emergencies. The fact that the individual could travel and live in different cities and states would be an added advantage!

What an interesting hypothesis, I thought to myself, and begun analysing if sustaining such a lifestyle was possible in the Indian context.

Table 1: Average hotel expenditure

Particulars Daily Cost Yearly Cost
    Cost of an average 3-star hotel in Mumbai     3,500 12,77,500
    Cost of daily medical care 1,500 5,47,500
    Meals and local travel 1,000 3,65,000
    Total Cost 6,000 21,90,000
(For illustration purpose only)

So, I delved a litter deeper. It turns out that the daily cost of a 3-star hotel is Rs 3,500. Add to this the assumed daily healthcare cost of Rs 1,500 and Rs 1,000 for local travel and meal expenditure. The total per day cost is Rs 6,000 which adds up to an annual expenditure of Rs 21.90 Lakhs.

Table 2: Facts and data crunching can get you the retirement corpus you need

    Age (at present)        60 years         
    Retirement planned at age... 60 years
    Life expectancy 85 years
    Monthly Household Expenditure Rs 1,80,000
    Time to retirement 0 years
    Expected inflation per year 8.00%
    Monthly Expenditure - at retirement age    Rs 1,80,000
    Annual expenditure at retirement Rs 21,60,000
    Post retirement inflation 8.00%
    Post retirement life expectancy 25
    Expected return post retirement 6.95%
    Corpus required at time of retirement 608,67,659
(For illustration purpose only)

Let's look at my father's financial case for example. To lead a 25-year-post retirement life using the idea of the Texan individual, my father will need a retirement corpus of Rs 6.08 Crore! That's triple of what he can afford to retire with.

[Read: Can Retirement Funds Help You Build A Respectable Retirement Corpus?]

When I told my father the story of the gentleman in Texas and that to sustain the same lifestyle in India, he will need a retirement corpus of Rs 6.08 Crore, my father sarcastically replied, 'Well great. It took me 35 years to create a corpus of Rs 2 Crores, so I only have to work for another 70 years and hurray, I will accumulate a corpus of Rs 6 Crores!'

'You see Deepika, when you retire the objective is not to lead a lavish lifestyle but a happy life. I'm not saying that the Texan's idea of retirement is wrong. But once you retire, you want simplicity and stability. You can't get that if you are checking in and out of resorts and motels every other month. The Texan individual is able to 'get by' in the Rs 6 Crores, whereas I can live like a king with the same corpus here, in India. Having said that, what is life if you don't shoot for the stars?'

Table 3: Living life like a king with a Rs 6 crore corpus...

Age Opening
    for necessities   
   for yearly Travel   
   for Medical   
60 608,67,659 6,00,000 5,00,000 1,50,000 12,50,000 625,98,542
61 625,98,542 6,48,000 5,40,000 1,65,000 13,53,000 643,07,819
62 643,07,819 6,99,840 5,83,200 1,81,500 14,64,540 659,85,443
63 659,85,443 7,55,827 6,29,856 1,99,650 15,85,333 676,20,115
64 676,20,115 8,16,293 6,80,244 2,19,615 17,16,153 691,99,161
65 691,99,161 8,81,597 7,34,664 2,41,577 18,57,837 707,08,389
66 707,08,389 9,52,125 7,93,437 2,65,734 20,11,296 721,31,948
67 721,31,948 10,28,295 8,56,912 2,92,308 21,77,514 734,52,156
68 734,52,156 11,10,558 9,25,465 3,21,538 23,57,562 746,49,324
69 746,49,324 11,99,403 9,99,502 3,53,692 25,52,597 757,01,563
70 757,01,563 12,95,355 10,79,462 3,89,061 27,63,879 765,84,568
71 765,84,568 13,98,983 11,65,819 4,27,968 29,92,770 772,71,388
72 772,71,388 15,10,902 12,59,085 4,70,764 32,40,751 777,32,168
73 777,32,168 16,31,774 13,59,812 5,17,841 35,09,427 779,33,878
74 779,33,878 17,62,316 14,68,597 5,69,625 38,00,538 778,40,008
75 778,40,008 19,03,301 15,86,085 6,26,587 41,15,973 774,10,236
76 774,10,236 20,55,566 17,12,971 6,89,246 44,57,783 766,00,076
77 766,00,076 22,20,011 18,50,009 7,58,171 48,28,190 753,60,480
78 753,60,480 23,97,612 19,98,010 8,33,988 52,29,609 736,37,414
79 736,37,414 25,89,421 21,57,851 9,17,386 56,64,658 713,71,394
80 713,71,394 27,96,574 23,30,479 10,09,125 61,36,178 684,96,977
81 684,96,977 30,20,300 25,16,917 11,10,037 66,47,255 649,42,209
82 649,42,209 32,61,924 27,18,270 12,21,041 72,01,236 606,28,022
83 606,28,022 35,22,878 29,35,732 13,43,145 78,01,755 554,67,580
84 554,67,580 38,04,708 31,70,590 14,77,460 84,52,759 493,65,562
85 493,65,562 41,09,085 34,24,238 16,25,206 91,58,529 422,17,385
(For illustration purpose only)

My dad was right! In Rs 6 crore, he can spend Rs 6 lakhs every year on household necessities (more than enough for a couple), Rs 1.50 lakhs on medical needs, plus go on exotic holidays every year. After doing all this, he would still end up with a surplus of 4.22 crore at age 86. Now that's retiring like a king!

Sure the idea of retirement is different for different individuals and there really can't be a one-strategy-fits-all when it comes to retirement. What you want from retirement differs from another individual. For the Texan, retirement was all about adventure whereas for my father it is about peace.

[Read: Which Types Of Mutual Funds Should You Hold In Your Retirement Portfolio?]

So, irrespective of the corpus, build a retirement plan that helps you live the life you want and not the life that you need to.

George Foreman (an American boxer) famously said, "The question isn't at what age I want to retire, it's at what income".

At PersonalFN, we value your retirement dreams and strive to work effortlessly to ensure you get the retirement that you deserve.

You can plan for your dream retirement by simply reaching out to PersonalFN's Financial Guardian on 022-61361200 or write to info@personalfn.com. You may also fill in this form and our experienced financial planners will reach out to you.

Happy Retirement!

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Author: Deepika Khude

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