The retirement question!

My calculator for the "how much can I actually withdraw" question

I have an Excel template I've used for years to work out retirement plans for clients, friends, family and myself. It works because I do it as part of a process. But it lives on my laptop, and every time someone wants to poke at their own numbers, change one assumption, see what happens if they push retirement out two years, it means another round of back and forth. Of course, its a very detailed one including the inputs that I gather, but sometimes, I tell people - if your only concern is retirement, and its giving you anxiety, do a quick check before you decide to perspire, panic or plan! It's live now at blog.finsmacks.com/retire-cal Why three calculators, not one

Retirement math is really one relationship between three numbers, your corpus, your withdrawal, and how long it needs to last. But people walk in from different directions depending on where they are in their planning.

Some of you already know your corpus and want to know what it can support. Some of you have a monthly number in mind and want to know if your corpus gets you there. Some of you haven't saved the corpus yet and want to know the target you're building toward. Same underlying math, three different starting points, so I built three doors into it instead of forcing everyone through the same one.

You land on a page that asks which of these is your question, and it takes you straight there:

1. You know your corpus. What can you withdraw every month?

2. You know what you want to withdraw. How long will your corpus last?

3. You know what you want to withdraw. How much do you need to save?

There are already hundreds of these online. So what?

Fair question. Most of them do the same underlying arithmetic mine does, I'm not claiming a breakthrough in the math. What I kept running into with the free ones is that they assume you already know which question you're asking and which formula fits it. And almost all of them assume your withdrawal stays flat for thirty years, which nobody's actual expenses do.

So the difference isn't the math. It's that you can walk in from whichever direction you're actually thinking in, and your withdrawal can step up every year the way real expenses do, separately from whatever inflation is doing to the rupee.

Running the numbers

Say your corpus is INR 5,00,00,000, you expect it to earn 7% a year, and you want it to last 30 years.

With a flat withdrawal (no step up), that works out to about INR 3,25,000 a month.

Now add a 5% step up every year, because you want your income to grow with your lifestyle instead of standing still for three decades. The starting number drops to about INR 1,87,000 a month.

Same corpus. Same 30 years. Same return. Just one dial changed, and the starting number moves by almost half.

That's the number people get wrong when they eyeball this on the back of an envelope, or use a calculator that doesn't let step up move independently of inflation.

What it won't do

What I have deliberately stayed away from is providing a "when can I retire" answer or calculator view. I'd rather you look at what you need based on your timeline and see if that is practical, or, as I sometimes do, get frustrated with my day job and say, what if I just quit tomorrow?

It won't point you toward a fund or a stock. That's not how I work, tool or no tool. It's also a pre-tax number. Debt fund taxation depends on your income slab, and tax rules can shift over a thirty year horizon, so I didn't bolt a tax assumption onto a projection that would likely be wrong by year 10 anyway. Use it as your starting point for the real conversation, not the final answer.

Net net:

Go run your own numbers instead of taking mine on faith: blog.finsmacks.com/retire-cal. Two minutes, and you'll know exactly where you stand instead of guessing.

Tell me if a number surprises you. That's usually where the actual planning conversation starts.