A 12 Min Diary: Retirement Plans

Thinking through possibilities

XQ
The Eden Of XQ

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Photo by Aaron Burden on Unsplash

Ahh, sweet retirement. Even Thanos had a plan for it! But do you?

This diary reflects my strategies, milestones, and the joys of planning a life filled with simple pleasures and personal passions. Let’s talk about retirement. What does it really mean in the modern-day context?

While sharing personal ideas, I hope it inspires or nudges you to think of your plans. I am 25 when writing this, and it is never too late or too early to plan for retirement.

My Take on Retirement

In simpler terms, retirement from a life where I have to work and trade time to make money actively.

Let’s clear some misconceptions.

  • It’s NOT about not working on anything.
  • It’s NOT about completely stopping to make money.
  • It’s NOT about solely depending on passive income.
  • It’s also NOT about just pursuing hobbies full-time.

So, what do I mean when I say “retirement”?

  • Freedom of time, with 24 hours in a day, almost all of it in my complete control.
  • Freedom of money where I need not actively work for it, should I choose to.
  • Freedom to say NO to work that I don't feel like doing.

All of it together gives us the freedom of thought to think of new possibilities and new ways of living.

An early retirement or the so-called “FIRE movement (Financial Independence, Retire Early)” isn’t everyone’s cup of tea.

Only those who clearly know how they want to spend their time (and money) can benefit from it.

You must have a crystal-clear vision of your post-retirement life before you think about planning what to do to retire early.

Before I share my vision, here’s the one signal that will tell me it’s a safe time to retire.

When the passive income generated from my portfolio of assets and investments is enough to take care of all my (and dependents) living expenses and maintain side projects adjusted to inflation.

This, however, does not account for any unforeseen one-time expenses that can come up — say, sudden health issues or some other repairs and liabilities that come without warning.

To cater to such needs, I maintain a separate “emergency fund” that is different from my “retirement fund.”

In the worst-case scenario, if my emergency fund gets used up in a time of need and I am forced to use my retirement funds, I may have to come out of retirement and take up a full-time job if none of my post-retirement side gigs generate enough revenue to sustain.

In short, here's what I plan for:

  1. Use pure passive income generated by the retirement fund for all everyday living expenses.
  2. Use a separate emergency fund for one-time big-ticket expenses.
  3. Use money from side gigs or part-time work that I may do for the joy of it, to replenish the emergency fund and grow the retirement fund further.
  4. In case both the retirement and emergency funds deplete beyond a certain threshold due to unforeseen circumstances, I must be prepared to get back to a full-time job to restore them.

What After Retirement?

Here are all the ways I plan to use the freedom of time.

  • Spend more time sleeping, without any alarms (I already practice this except for when there’s something important on schedule).
  • Create more content on topics I love, without any pressure to monetize it. I can see myself writing more on LinkedIn, Medium, and a few other online websites, magazines, etc.
  • Make YouTube videos or Instagram content, leisurely, just to share my thoughts, ideas and adventures. I want to do reviews of video games, anime, TV shows and movies that I explore.
  • Extending the above point, spend more time playing video games, following movies, series, etc.
  • Work on side projects and research in any technology or use case that fascinates me.
  • Spend more time with “pleasure cooking”, exploring different cuisines leisurely.
  • Spend more time building good relationships in life, and schooling, taking care of kids (if any).
  • Become a part time teacher for subjects I like. I may run some summer/winter school or a cohort (online or offline based on context) every now and then.
  • Explore outdoor activities on weekdays when the rest of the world is busy working. I like experiences with less crowds and chaos.
  • Spend more time focusing on health.
  • Write poetry, fiction or explore painting, crafts, embroidery and other forms of art.

A typical day in my life post-retirement can look like this.

  1. Wake up around 8–10 AM leisurely and do household chores.
  2. Catch up on social media updates and news. Take care of kids, schooling, and their activities, if any.
  3. Do part time work if any.
  4. Work on a passion project or creating content for a couple of hours.
  5. Spend time with some physical exercise for an hour or so.
  6. Enjoy YouTube videos, movies or shows in the remaining free time.
  7. Have more weekday getaways. Explore various places and activities around.

A simple minimalistic life. That’s what I aspire.

How will I find purpose in this lifestyle?

  • Via side projects and research that solve real world problems that I deeply connect with.
  • Via part time work or even volunteering with NGOs in domains that I find fulfilling.
  • Via building communities and helping people through my content and mentoring sessions.
  • Via spending more time with family.

These lists and ideas are not exhaustive. There are infinite possibilities to explore. But without overwhelming ourselves, one can pick a small piece of the cake that they like.

Suffices to say, there are many ways to live, and many things to do, that can keep someone occupied, entertained and fulfilled and live a life on their terms.

Reaching Retirement Zone

So, you have decided that you want to live this new type of retirement and have a clear idea of what you will be doing after retiring. How do you reach a stage where you can confidently tell yourself that you are ready for it?

The short answer: You have saved a lot of money and built an investment portfolio where the income it generates meets all your expenses. Simple.

Let’s say, you saved 2 crore INR and you simply put it in an FD at 7% interest rate.

You’ll earn a monthly interest of about ~116K INR.

If a ~100K INR is more than enough for all your expenses, that’s about it.

You are ready.

But what about inflation and rising prices?

Once you reach breakeven where your passive income meets your expenses, you still need to keep growing your portfolio by adding in money from your side gigs, part time work, or simply, the monthly savings that you didn’t spend. For example, in a given month, you only spend 70K INR of your >100K INR interest. You can reinvest the saved amount and keep growing the corpus, such that year over year, your passive income increases too, beating inflation.

On the flip side, if you are able to calculate your lifetime expenses (say from today to till you are 100 years), adjusted to inflation, you will get a granular clarity of your numbers. Even without further growing your corpus, you will know if you can comfortably live to 100 years just by withdrawing money from it slowly.

For most common people, a portfolio of 10 crore is more than enough to retire comfortably and enjoy a luxurious life. Of course, no number can ever be enough based on your lifestyle, but these are some really good ballparks for normal people with normal desires and expenses.

If you are sustainable and optimized, a 5-crore portfolio is enough.

If you are a minimalist, even a 2–3 crore portfolio is enough.

But even saving 2 crores is a very big deal, right?

How can you reach such huge corpus?

Here are some important insights for anyone who wants to be self-made (with no inherited wealth) and build such net worth while staying in India.

  1. Have a clear budget right from the start of your first job.
    Budget your expenses. Every month, just keep your budget aside and invest the rest of your income. Strictly follow your budget and optimize your lifestyle for the same.
  2. Think in percentages.
    I don’t imply you to deprecate your life quality to maximize your savings. It’s important to think in percentages. Say, you keep 30% of your monthly income as your budget and 70% is invested. The more you grow and the better paying jobs you get, you will have more expendable cash within that 30% (30% is a general example. The smaller this % is, the better).
  3. Practice delayed gratification.
    Reward yourself for good habits with things you want to have but don’t really need. Don’t get them outright even if you can afford it. Your wants should also come from the 30% that you budgeted and not from your investments. Within that 30%, save enough, month over month by living below your budget and then with those savings, reward yourself. This way, you will dramatically reduce impulsively purchases and promote better financial prudence for yourself.
  4. Get into a job that pays at least 14 LPA INR in your early 20s.
    This implies a monthly take home salary of over 100K INR, and it helps one reach the 30–70% split with budgeting where 30% is sustainable enough to budget all living expenses. Even if you live in expensive cities like Bangalore or Mumbai, it is possible. You just need better planning and optimizing some expenses like rent and weekend spends. Most tech jobs pay around and over 14 LPA once you gain good work experience and plan a job switch or get a promotion. As you get senior roles, by 25–26 years of age, 14 LPA is not out of reach even if you are not working in some big tech company. Many other domains like marketing, and consulting at lesser-known firms also pay in this range. If you want to pave your own path, even freelancing is an option. So, don’t think like you need some super high-end job or work at a big MNC for such salaries. Stay aware of the various opportunities, keep building expertise, proof of work, and pivot to new jobs if you are underpaid. Even if you are starting at 3 LPA, you can plan a good career with tremendous growth that comes with upskilling and work experience.
  5. Stay away from big debts.
    If you are thinking about FIRE, having debt will always pose a huge challenge and elongate your journey by as much as 5–10 years. You need to let your tree grow properly and overtime it will reward you with fruits. If you cut the branches in between to fund your EMIs or support your debt, the fruit may never bore. Big debts include expensive education at post graduate level (especially if it’s within India, it can become a huge opportunity cost), car loan, home loan, etc. Unless it's absolutely necessary for your personal context, avoid cutting your investments short to fund these things. Don’t worry about what others are doing or what parents or relatives tell you. That said, if you have surplus income where your 30% budget in itself is large enough to fund such EMIs, it makes more sense to consider such options. This way, your original investment plan won’t be affected.
  6. Invest sensibly, sustainably and consistently.
    I find passive index based mutual funds as a pretty simple choice. An investment portfolio can consist of a mix of NIFTY50, NIFTY Midcap, NIFTY Next50 and a reputed small cap fund based on ones’ risk appetite. Getting net adjusted returns of 12–15% is not beyond reach. This is more than enough for most people, especially if you don’t want to spend your time on any personal stock picking, the tensions and headspace effort that comes with it. Google (or ask ChatGPT) these terms, learn more and think about what your portfolio should constitute. Please do your due diligence before you make investment decisions. I am just sharing these thoughts from my personal experience. Invest regularly, preferable on a monthly or biweekly basis and whenever you see a market crash, invest more than usual to take advantage of the situation.
  7. More minimalism = Faster FIRE.
    Ultimately, the portfolio value that you need to build depends on your personal living expenses and a budget that can sustain your lifestyle. The more minimal and simpler your life is, the smaller corpus you need. If you plan to retire at a tier two town and lead a simple and silent life without much travelling or expensive objects and activities, the corpus you need would be even lesser.

I follow all the above ideas, but I started planning, investing and saving diligently, only after 2+ years into the workforce, which I regret. Starting your investing journey early, even by a couple of years makes a huge difference in the long term. So, even if you are just out of college, it’s worth planning all of this. Your future self will thank you.

At 25, I was able to reach a portfolio, where the modest passive income that can be generated exceeds my living expenses in Bangalore as a bachelor without any dependents. Should I choose to, I can take a lean FIRE right now, retire and maintain my current lifestyle. This can also be attributed to my minimalistic lifestyle.

Just this fact already gives me a certain assurance and mental freedom to not chase unsustainable growth or work too much on things I don’t enjoy.

All said, I am obviously not retiring at the moment as I would need a higher corpus for dependents and other future lifestyle expenses.

Let’s take an example of an average tech worker in Bangalore who makes 110K INR monthly take home and is able to save and invest 70K INR every month. A distributed MF portfolio across index funds, midcaps and small caps can give a net annual return of 15%.

15% is very much possible. NIFTY50 can give around 12% returns. SmallCaps, NIFTY Next50, and Midcap funds often give more returns than NIFTY50. My personal MF portfolio net average returns are >25% for example.

In 7 years, you’ll most likely build a portfolio > 1 crore following all the above practices. Even if you start at 25 and plan well, by 32, you’ll be at a very comfortable place, debt free with a great safety cushion and surplus cashflows which you can use to upgrade your lifestyle or exercise the delayed gratification by getting the stuff you wanted.

Computed via Groww’s SIP calculator.

If you extend your investing journey to 10 years, you will make a corpus close to 2 crores. You will be at a position to afford a decent home at 35 without having to worry about EMIs, loans or doing a job you don’t like. This is the fruit of delayed gratification. Making your first crore is hard. It may take 7 years or more. But your second crore will come at half that time, and your third crore, even faster. This is the power of compounding. If you continue your investments for another 5 years, you may end up building a corpus > 4.5 CR. At 40, you can retire quite comfortably, based on your lifestyle.

When making your next crore becomes very simple and quick because you have a large portfolio that has compounded over time, things like buying expensive homes, cars and other objects of luxury get way easier without causing any big dent in your cashflows.

As I mentioned earlier, if you never let your tree to grow and keep cutting the branches with EMIs and premature loans, it may always feel like trying to catch a running bus.

In the above example, I assumed a fixed salary of 110K where budget is a strict 40K per month and investments at 70K. In real life, your expenses will grow, and so will your income. As long as you keep upskilling and doing good work in this phase, you will grow, get promotions, better jobs and more income, enough to sustain your 30–70% split.

Any job in the tech industry is a good option to pick to follow this path (especially if you don’t want to spend money on expensive PG programs and take early debt). That said, make sure that you are getting regular promotions or switching to better jobs to improve your income throughout. Once you reach the initial 14 LPA threshold, you will be at an excellent position to execute your FIRE plans.

I have covered a mid to lower average scenario. Most skilled people in tech earn much higher than 14 LPA. The top percentiles in this industry easily earn over 20 LPA and the equation becomes even more quicker for them.

In the best-case scenarios, you could probably accelerate your income to 30–50+ LPA and reach a FIRE status by your early 30s.

Do note that the equation can get skewed if you are the sole breadwinner for your family. I think, in this day and age, being a dual income family is important. It makes the whole process easier and gives so much more leverage with additional expenses like for kids and healthcare.

These are my current thoughts, plans and ideas of how I want to achieve FIRE and what I want to do in life after that. I am constantly learning new stuff and possibilities as I explore more. Do add disclaimers as required and I just present a high-level overview without getting into the nitty gritty details.

Found this insightful? Does this diary inspire you to plan your FIRE? Let me know in the replies!

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XQ
The Eden Of XQ

Exploring Tech, Life, and Careers Through Content 🚀