8.3% guaranteed return tax-free in India

[justanotherperson]

I came across this while searching net for early retirement plans......
Very intresting thread....

But no post since longtime ....are you guys still on with the retirement plans.

 

[DesiGirl]

Status Update after 10 months

I was thinking of updating the status on this post or our retirement plan in general and justanotherperson provided the nudge needed. OK here it goes -

* I managed to lock approx. $125K+ @ 9.5% per annum fixed deposit (pretax and my effective tax rate is < 10%) in govt. bank for 10 years. So that amount guarantees us living expenses till age 57-58 (Till younger kid is 26-27 so both of them are adult well settled , educated and we are clearly done with them financially) if DH retires after next 2 years. Inflation will have to be fixed at 6%, if its more than that too bad, that's the raise we got.
* Now side note is for kids education till high school (practically school fees has to be paid in India) we have separate escrow with 20% inflation rate assumed. ( Eating / Shelter & Kids Education being top priorities and education is high inflation even in USA).
* We have earmarked needed amount of money (8% inflation) for kids graduation , postgrad & marriage. We have made our peace with the fact that it is the max we can afford, they can always borrow from one bucket for other or take education loans if any further amount is needed.
* We have created buffer for medical / Emergency / taxes etc.
* Will move into own house next year 2013 so rental expenses gone. House 2 will start earning rental income 2014 to provide us vacation expenses.
* DH's job situation continues to get crappier.
* We are set till age of 58 if we retire 2014 end or beyond. Big question is will market + fixed portfolio give us 9% post tax returns needed and also can we live with 4% inflation adjustment beyond 60 and we do not live beyond 100 years of age.

Overall going towards income flooring + discretionary / bucket kind of model with heavy reliance on fixed income instruments. After age of 60 we'll get access to 9% guaranteed return instruments or more regardless of interest rate cycle. ( Rates have come down to 8.5% since inflation is down

Doesn't look like DH will be able to pull till 2016 as thought earlier so I did tweaks in the plan to bucket model instead of generic SWR. (Anyway WR comes out to be < 4% and keeps going up with age as % of folio) We have second house to sell and some gold and Social Security. Working on creating an inflation adjusted source of income.

We'll see how things go.

Regards,
DesiGirl

 

[rescueme]

* I managed to lock approx. $125K+ @ 9.5% per annum fixed deposit (pretax and my effective tax rate is < 10%) in govt. bank for 10 years. So that amount guarantees us living expenses till age 57-58

So you are saying you can get by on $11,875 per year, or is that in addition to other income?

 

[DesiGirl]

Rescueme our current living expenses are 11-12K (depending on dollar - rupee rate). This includes :
Food & other supplies - $220
Electricity - $50 avg
Internet / Phone / Cable - $60
Cleaning Lady - $50
Cooking Gas - $10
Community Maintenance - $100
Eatout - $125
Gas/ Petrol - $70
Clothing/ Gifts /Festivals/Vehicle Maintenance / Misc - $1000-$2000 per annum

Doc visit is $7-8, medicines $5-10 , Full medical $100 so mostly medical is taken care in misc. but Self Insurance amount is kept separate, we are a country of $1500 heart surgery .
Kids Education is accounted separately ($2K per annum per child)

2-3 years down the road they would be $13-14K (taking 6% inflation). We have expense data for last 5 years and also currently we spend on cash only basis to make sure our expenses are limited to what we have taken out from ATM.

So essentially $125K+ interest (post tax) can be considered as cash bucket which would take care of expenses for 14 years (Higher expenses and limited flexibility due to kids). This allows our remaining retirement capital of $210K to grow for 14-15 years and provide for remaining years of life.

Retiring in very early 40s is definitely tricky but DH's current high paying job may not continue for long (Next job could be 20% less work with 50% pay cut) also statistically speaking average life expectancy for Asian Indians is easily 10 years less than Caucasians so our retirement may not be very long but still we are talking about 40+ years.

-DesiGirl

 

[Meadbh]

Wow, orders of magnitude differences in the relative numbers between India band North America. I guess this is the premise for the recent movie "The Best Exotic Marigold Hotel" in which a group of British retirees move to Jaipur to make their nest egg last.

It's always interesting to hear from you, Desi!

 

[DesiGirl]

Thanks Meadbh.
One reason being what is considered very frugal in USA is norm for middle class India. For example -
* I cook roti (whole wheat tortilla) from scratch twice a day. Cook 80 out of 90 meals a month at home.
* We eat meat (chicken/fish/shrimp) 2-4 times a week and even then a $7 pack of biryani (Rice & chicken) feeds us 1+ times.
* AC is hardly used 3 months in an year, fan works beautifully whole year.
* Cloths are line dried and if needed hand washed.
* Dishes are done by hand (me or my cleaning + dish lady who comes twice a day ).
* Kids do not have any activity other than Karate ($20 per month) they just play with neighborhood kids.
* Medical & Insurance expenses do not kill us (That has to be a big one).
* No alcohol expenses.
* For vacation we travel in trains. $250 takes family of 4 across India in First AC sleeping cabin with 3 meals + 3 tea & snacks included (Does take 20 hours).
* Could hire a Driver for $250 per month or a Cook for $75 a month which I don't.
* Eat lots of veggies & tropical fruits which are mostly 25-50 cents a pound.
* Dress simply but good quality and keep wearing them till they wear off.
* Not into makeup / shoes / bags, I hardly utilize the $10 facials / pedicures & manicures.

So its a simple life but a happy one.

-DesiGirl