saved up 35% of early retirement target 2017

High-level numbers below

  • My Age: 36
  • % Saved for Early Retirement : 38%  34% (target % reduced due to 10.4% LTCG tax announced in the budget after this post was originally published. I’ll write a detailed article on this new tax’s impact next month)
  • Next year we are hoping to reach 50% 46% of our target. Fingers crossed!
  • I’ll update the progress bar on the right-hand sidebar every year with our progress
  • Current Monthly Saving rate : 25%
    • single-income household as mentioned in the NRI post.
    • this savings is from my business income
  • Effective Monthly Saving rate : 50%
    •  wife is moving her low-return F.Ds to mutual funds via SIP so we are effectively saving 50% of income in mutual funds towards retirement.
  • We currently have a 60:40 split between active Mutual Funds & inactive EPF/PPF.
    • more SIP in the coming years will tilt this balance towards equity
  • Our Total Portfolio Return is approximately 14%. Our Expected return is lower at 12%. 
    • Our Large-Cap fund returned 18% as of Dec 2017. We are taking this as indicative of our equity returns even though we have some mid-caps that performed better because only our large cap fund shows the XIRR 🙂 For accurate numbers we have to calculate manually and we haven’t done that yet.
    • Our PPF interest rate was 7.6% as of Dec 2017. Using this as indicative of debt returns. I’m deliberately using the lowest PPF rate since I’m approximating here.
    • So with a equity:debt ratio of 60:40, our total portfolio return is around 14%. (60×18% + 40×7.6%)
    • I’m sharing our returns only to document the numbers so we can look back many years from now on the ups-and-downs in returns. We are not really worried about the ups-and-downs as it will get smoothed out over the years like I explain in my blog post 12% return from stock market every year?

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21 COMMENTS

  1. Hi Naren,

    As you said you Adjusted the Target because of LTCG. I have another question around this. As the Market is not Good this yearThe MF returns are sometimes Negative and have drained the Portfolio. so should we readjust the target. e.g My MF returns till May were 14-15% and now they are 8%Which has reduced my Portfolio Value

    • Hi Amrit, LTCG is a fixed tax on equities now. It is a fixed expense we know we will have since 60-70% of our investment is on equities so we had to adjust for it in our calculations.

      Unless you are retiring in next 5 years you should not worry about the market ups and downs that much because hopefullyarket should recover.

      But if you are retiring when markets are down than you have to be prepared for sequence of returns risk. We will soon write about it on a blog soon

  2. Good articulation overall ! You are living a life many (including me) would be jealous and one of the reasons is, you are living this life in GOA ( a place meant for vacations ). Wowwww !

    I have been an avid follower/ reader of FIRE masters like MMM, JD Roth etc. I am 37 years old with 2 kids and a wife ( working) and though I have been saving all my life, but that was more like aimless / incidental. I have been on the FIRE journey since last 2.0 years effectively and started saving aggressively ( roughly 70 %). This is without a major compromise in areas like travel, food, movies etc but having a frugal/ practical approach overall. I target to retire in the bracket of 43- 45 and sticking to 37-40 X ( instead of 25 X) multiplier as the accumulation target. Here is my list of questions to you:

    (1) I see you and the other FIRE aspirants moving a lot of their portfolio to equity, but as a general thumb rule, the more closer one approaches retirement ( or early retirement), concentration should be more towards debt. What is your view and advice on this ?

    (2) I also recommend a strategy where one retires early for eg in the bracket of 45-50, but investing in NPS ( lock-in till 60 year) is still a good option. There are couple of benefits. First one being this provides additional taxation benefit ( as high as 30 %) and a monthly contribution of 10000 ( effectively 7000 after tax benefit) , starting at age 3, can provide an annuity monthly income of roughly 24000 and a lumpsum of 71 lakhs. This is after buying 40 % annuity and rest 60 % as lumpsum.. If buying 100 % annuity, then monthly income of INR 60,000 can be generated. This amount kicks in at age 60 and provides an extra buffer should one hit a bad patch during retirement. Also, compounding is still working for you, even after early retirement. What is your view ?

    (3) How does one account for major expenses like child’s education and marriage in the overall run-up to retirement. When these expenses actually happen, can these be converted into some type of EMI’s through some innovation, so that the retirement kitty doesn’t get exhausted in one go and has a chance to rebuild.

    Thanks
    Neeraj Nangia

    • Hi Neeraj,

      Great saving rate, congratulations.

      !. In one of our recent blog post- Safe Withdrawal Rate-How long will your Money last in retirement. We have taken 50-50% debt/Equity and ran some numbers, if you have not read that blogpost we recommend you do. Our own plan is to keep minimum 50% invested in Equity till say we reach Age 55, to make sure that we get inflation beating returns. Even at Age 70 we plan to keep Equity share to minimum 30% for the same reason. But remember all this is in theory and we may need to revise our strategy in future if need arises.

      We do not recommend one size fits all approach when it comes to this, we suggest everyone to plan according to their own risk preference, because peace of mind is also very important.

      2. We like the idea of fixed annuity at retirement, but we are not a fan of NPS so we can not say much about it. Maybe other readers who have invested can share their views.

      3. Our retirement fund only accounts for OUR living expenses after retirement, and we recommend same strategy to everyone. We have separate funds for other big expenses, including child’s college education- we will share a separate blogpost on that later. We are not saving anything towards our Kid’s marriage, If we can afford it at later stage, it will be a bonus:-)

      • Thanks for your advice !

        After a detailed evaluation of pros and cons of NPS, i have decided not to go for it. I have a follow up question. Suppose you accumulate X amount of MF/ Equity when you reach retirement. What should be the plan to generate a regular income from the that kitty ?

        • We have answered our approach on withdrawal strategy after retirement in our blog post Safe Withdrawal Rate- How long will your money last in retirement

          This strategy is purely based on withdrawal from debt/equity portfolio. And it is enough if your retirement corpus is invested only in debt and equity instruments.

          But I think some of us may also have passive income from various other avenues- like rental income from real-estate, or side hustle. So, do add if you have monthly income inflow other then you debt and equity investments while calculating post retirement income.

          We are planning for multiple passive income streams ourselves: currently we get rental from apartments, we are building a blog that will generate some passive income in future, we are trying few side hustles that may give us some money in future. At this point we add real estate rental in our income but the others are still couple of years away from generating cash so we do not write about them in detail.

          Have a look at the blog post on safe withdrawal rate and if you more have questions, feel free to drop it in comments.

  3. Awesome find. Really glad to see this. I’ve followed heaps of blogs on early retirement but they’ve always been foreign and it’s tough to relate. I’ve been on a similar journey for a few years now. Started taking it seriously maybe 4 years ago and now at 40, I’m 75% of the way to my corpus goal and starting to get optimistic about getting there in the next 3-4 years (I’ve targeted 45).

    Made some bad choices early on – ULIPs, FDs etc. but it’s starting to get better now as I’ve focused over the last few years and been ruthless about a few things. Still a ways to go – especially on the expense side where there’s a lot of fat but it’s tough especially with a young child.

    I’ll be following your blog regularly to see how you do.

    • wow! thanks for sharing your journey Anil.
      really happy to see people close to achieving their FIRE goal in India!

      Would you be interested in a short interview to share lessons learned from your journey?
      Our readers would benefit from reading about how you are saving up for FIRE while balancing child-related expenses.
      Let me know if you are up for the interview in your reply and I’ll schedule one 🙂

      • Hey…thanks for featuring the comment and responding. Sure I’d have no problem doing a short interview. I have to warn you though…my story’s pretty boring. No dramatic events. Always had a savings habit. Just woke up to investing and financial independence at some point and started making changes.

        Feel free to get in touch if you want to talk. My email ID is in the link.

  4. If I have to invest incrementally every year, is it better to invest in EPF/NPS or in an equity MF SIP.

    My stats : Single income, 36, one kid 6 years. Monthly saving : 44%, no debt

    • Thanks pravinsn1! Yes! a lot of articles on early retirement are all for U.S folks. I want to record my breakthroughs in early retirement as I accomplish it in India 🙂 Good luck on your journey! Do subscribe to the blog via email for more insights as I post them

    • Thanks himani! We plan to document our journey so others might feel inspired. The idea is to hit & solve problems that others might face after us. Welcome to SavingHabit!

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