When I started planning for my early retirement , I wanted to calculate when can I consider myself financially independent and found a website that helped me with the calculation.
If you would see that India has an saving percentage of one third of our income and we can strive to increase it to half
When you play around with the calculator you will understand that the key number that makes a lot of difference is the Saving rate hence in any retirement planning one should Focus On Saving to start with as that is in our control as against the market returns.
One of the drawback of the calculator was the it didn't take inflation into consideration as that would eat into the money over years hence I reduced my Annual Return of Investment by the rate of inflation, ie close to 2% for Sweden and may be 5-6 % for India.
Instead of the Withdrawal rate I have put in the average dividends rate across my portfolio that is given out as I would like to keep the principle amount constant and not dip into the stockpile that could reduce the ROI in the long run.
There is a 4% retirement withdrawal rule that was coined by William Bengen in 1994 (increased to 4.5 % ) which is being defaulted in the calculator, but as mentioned in the above the inflation as well as market return over a period of time would have an impact on this rule. Just imaging that if there would a market downturn during the starting years of retirement the money in the stockpile would get depleted quickly and hence the future withdrawal would take a hit. Hence instead of the safe withdrawal I would like to have a 4% dividend rule to start with that would increase over the period of earning life and hence could sustain a market down turn through dividends and the the withdrawal could be used for any emergency that could arise out of the longevity of lives we enjoy these days.
When I calculated the number it gave me was 14 years to retire and I then added five more years to it so that I can earn the needed moolah for any emergency expenses that could crop up.
If you would see that India has an saving percentage of one third of our income and we can strive to increase it to half
When you play around with the calculator you will understand that the key number that makes a lot of difference is the Saving rate hence in any retirement planning one should Focus On Saving to start with as that is in our control as against the market returns.
One of the drawback of the calculator was the it didn't take inflation into consideration as that would eat into the money over years hence I reduced my Annual Return of Investment by the rate of inflation, ie close to 2% for Sweden and may be 5-6 % for India.
Instead of the Withdrawal rate I have put in the average dividends rate across my portfolio that is given out as I would like to keep the principle amount constant and not dip into the stockpile that could reduce the ROI in the long run.
There is a 4% retirement withdrawal rule that was coined by William Bengen in 1994 (increased to 4.5 % ) which is being defaulted in the calculator, but as mentioned in the above the inflation as well as market return over a period of time would have an impact on this rule. Just imaging that if there would a market downturn during the starting years of retirement the money in the stockpile would get depleted quickly and hence the future withdrawal would take a hit. Hence instead of the safe withdrawal I would like to have a 4% dividend rule to start with that would increase over the period of earning life and hence could sustain a market down turn through dividends and the the withdrawal could be used for any emergency that could arise out of the longevity of lives we enjoy these days.
When I calculated the number it gave me was 14 years to retire and I then added five more years to it so that I can earn the needed moolah for any emergency expenses that could crop up.
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