Many people want an enjoyable and relaxed life of financial independence during their retirement years. India is a “shortcut” to this lifestyle, due to its low costs of living. In fact, this is how much you need to retire in India:
To retire in India you need $700,000 in your retirement fund. This will secure a highly comfortable lifestyle. The minimum amount you need saved up is $450,000 – which gives you a decent lifestyle.
Saving up that much money is hard. Learn how to save more money in this article: The 4 Steps To Save A Lot Of Money Fast
The earlier you plan for this crucial stage in your life, the better your chance of accumulating the necessary corpus for a comfortable post-work life in India. Unfortunately, there is no one-size-fits-all answer to this question.
However, it is possible to provide an estimate of how much money you need to retire in India based on several crucial factors. These factors are your estimated desired monthly expenses in retirement, the inflation rate during the post-retirement stages, and the expected return rate during your retirement years.
Herein is a comprehensive overview of how much money you need to retire in the second-most populous country in the world.
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How Much Money to Retire Comfortably in India
One of the best ways to estimate your monthly expenses during your retirement phase is to tie it to your current lifestyle and then factor in the impact inflation will have over the years.
You can calculate your current household expenses less your investments and loan requirements etc.
According to Expatistan, the current monthly cost of living in India for a single person is approximately $630 and $1,500 for a family of four.
Inflation during the corpus accumulation phase is an aspect of retirement planning that many people neglect. This can cost you greatly.
As you will be saving and planning for decades, your expenses naturally grow manifold. As such, you must align your savings to cater to the expected higher expenses.
Let’s say that for you to live comfortably currently, you need approximately $550 per month. Many experts prefer using an inflation rate of 6%. You may tweak it higher or lower depending on the nature of your expenses and lifestyle. If you have 30 years to retirement, your monthly expenses during that time will be roughly $3000!
You also have to factor in the inflation rate during your post-retirement stage:
Since your retirement planning may involve several decades, when you include the pre and post-retirement stages, the average inflation rate may exhibit some changes.
India is a developing country and is therefore expected to have higher inflation during its high growth stage. However, the growth rate may subside in time, and the inflation rate may fall.
With this in mind, you can use a lower inflation rate during your post-retirement stage if it’s several decades away.
During your accumulation stage, you can take greater risks with investments for higher returns as you have time to make up for any losses. To increase your ROI, you may allow a larger portion of your investment in equities through the National Pension System and mutual funds.
If you have a higher risk for appetite, you can go for Alternate Investment Funds, REITs, commodities, etc. However, once you retire, your appetite for risk will naturally come down. As such, a realistic plan would be to opt for conservative investment returns during your post-retirement stage.
Now that you have considered all the crucial factors, you can calculate the retirement corpus you need for a comfortable life in India using the present value formula (Present Value = Future Value*(1+r) ^n). Below are the considerations for this calculation:
- An assumed life expectancy of 25 years after retirement(N)
- An expected conservative post-retirement rate of return of 7%(R)
- An expected post-retirement inflation rate of 5%(G)
- The aforementioned monthly expense of $3,000 equating to $36,000 per year(P)
In this case, with a comfortable monthly expense of $550 today with 30 years left until you retire, you will need a retirement corpus of approximately $700,000(Rs 5.2 crore).
To live comfortably, you need to have a retirement corpus that’s at least 200 times your monthly income or expenditure as a thumb rule.
Looking at the above calculations, the estimated retirement corpus is approximately 220 times the future expected monthly expense of $3,000. With this amount, you have a considerable overhead that will support a comfortable lifestyle.
In our sample above, if your investment during your accumulation stage before retirement generates annual returns of 10%, you need to invest at least $336 every month for the 30 years to build a comfortable retirement corpus of $700,000 or 5.2 Crore.
Suggested reading: Is Saving $1,000 a month good? (Where you’ll be in the future)
The Minimum Amount to Retire in India
If you choose to live a frugal and cost-conscious life during your retirement, the amount of money you need to retire in India will be considerably less. India has a relatively low cost of living. You can be able to live off less money by cutting down on expenses.
Where you choose to stay in the country is one of the main factors that will determine the minimum amount of money you need to retire in India.
According to Living Cost, the most expensive states to live in India are Maharashtra, Haryana, and Karnataka. The monthly cost of living in these states is closer to the $550 a month used for the calculations in the previous section.
This figure is on the higher side and serves to support a comfortable lifestyle. You can save on expenses by choosing to retire in the cheaper state.
The states with the lowest cost of living in India include Kerala, Odisha, Puducherry, and Bihar. The monthly cost of living in these states is around $350 a month, or $4,200 a year.
With this current monthly expenditure, you can calculate the minimum amount of money you need to retire (frugally) in India:
Accounting for the same factors (30 years period to retirement, assumed life expectancy of 25 years, expected post-retirement inflation of 5%, estimated post-retirement investment rate of return of 7%) and the new current monthly expenditure of $330, you need a retirement corpus of approximately $450,000 or Rs USD 3.4 Crore.
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Is Retiring in India a Good Idea?
There are both pros and cons of retiring in India that you should consider. One of the main reasons why many non-residents choose to retire in India is the low cost of living. India has a lower cost of living than many other countries. The health care and medical costs are also low.
India has a good mix of urban and rural areas; therefore, you have options depending on your preferences:.
The country is also home to many tourist attractions and destinations, so you will have plenty of places to visit and things to do while retired in the country. The cost of touring the county is also low. India is one of the most popular countries for medical and religious tourism.
India is also a great country to invest in during your retirement years. India is one of the fastest-growing economies in the world. According to the 2021 United Nations Conference on Trade and Development Report, the economy is projected to exhibit a growth of 6.7% in 2022. This will be the fastest projected growth rate for that year.
India also has the largest youth population, is rising in global competitiveness, has improved in the Global Innovation Index, and is experiencing increasing economic influence.
All these factors mean that India is an excellent country to invest in now and is set to be an economic powerhouse for years to come.
Another advantage of retiring in India is the choices you have when it pertains to climate. India has a diverse climate range from hot deserts, lush forests to chilly mountainous regions.
Depending on your location preferences, you can choose to reside in a wide range of climates. Connectivity and infrastructure are also gradually improving, especially in the urban areas.
The most notable con of retiring in India is that the standard of living in the country is lower compared to more developed countries:
Also, the high population of the country can be a disadvantage when it comes to aspects including transport (chaotic traffic), air and noise pollution, and the efficiency of available infrastructure.
Overall, India is a good country to retire. The pros of retiring in the country outweigh the cons in my opinion.
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