Most 25 year olds have an aspiration to retire at the age of 40. They would like to spend their working life earning lots and pots of money, and bask in the glory of their previous earnings.

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Lets take example of Sid, who is 25 years today and intends retiring at 40. Assuming he invests all his savings of Rs. 25,000 per month  at 12% p.a., he will accumulate a corpus of Rs. 1.25 crore at age 40. During this time, inflation of 6% p.a. will increase his expenses to Rs. 120,000 per month (see table). In the course of our workings, we tend to consider returns of just 1% p.a. over inflation in the post retirement phase. Even if Sid’s expense levels do not increase (which is unlikely once he has a family), and if he takes extra risks and earns 2% p.a. over inflation in his retirement days, the corpus will last under 10 years. It’s time to wake up, Sid!

Also Read : Retire rich with just Rs. 40/-

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