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Old 01-01-2011, 02:24 PM   #21
Dryer sheet wannabe
Join Date: Dec 2010
Posts: 21
Originally Posted by W2R View Post
Hi, mask! How lucky you are to be in India, where I would imagine it is probably warm and summery right now, while the U.S. and Europe dig out from various snowstorms and blizzards!

Even here in New Orleans it was below freezing several nights last week, and I had to cover my more delicate plants for protection from the cold.
Hi W2R, Eat loads of snow food and stay warm!!! It is 50 degrees F here....but that's cold going by our standards....I know you would rome around in your shorts in 50 degrees F!!!!
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Old 01-01-2011, 02:34 PM   #22
Dryer sheet wannabe
Join Date: Dec 2010
Posts: 21
Originally Posted by Martha View Post
It may be tough to find people here who are at all familiar with investing in India. Good luck!
Thanks Martha. I'll keep my fingers crossed!!
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Old 01-03-2011, 04:09 PM   #23
Dryer sheet wannabe
Join Date: Dec 2010
Posts: 21
Originally Posted by mask View Post
Hi desihopeful! Wish you a very happy and successful new year too! You have made some very relevant points. I will try to address each point at a time.

"1. Pune is a nice city. I am guessing you are in the IT field. Are you looking to retire in Pune?" We have not thought where do we want to retire. It may be Pune or a place less expensive than Pune. Current estimates are based on the assumption that we will retire in Pune.

"2. Being solely dependent on real estate sounds extremely risky." I agree. Please refer to my reply to walkinwood and provide your perspective.

"3. You mentioned no kids. If you plan to have kids someday, it might throw off your calculations by quite a bit." I agree. Currently we don't plan to have kids. If and when we do, early retirement might get pushed by 10 years or so.

"4. Inflation is the big X-factor in any early retirement financial plan, when it comes to India. I am not sure you are considering it in your computations. Rather than work with a 6% conservative interest return, you should probably consider a Safe Withdrawal Rate (SWR) in the range of 2% of your total portfolio, to determine your income per year post retirement." I don't think I understand this fully. Does 2% SWR = assets lasting for 50 years since 2% times 50 = 100%? "SWR" is an unfamiliar term. I will do some googling to understand SWR before I come back to you on this one.

"5. 2 more houses before you turn 40, is again quite impressive. You must be saving a large portion of your take home salary. Good for you." Thanks!
I'm keeping my fingers crossed!!

"6. Is your medical insurance, company provided? I have been struggling to find a inflation-indexed medical insurance. 5Lakh medical insurance today, will not be worth much in 5yrs at the rate at which medical costs are inflating. Do you know of any good medical insurance products that are inflation indexed?" - No. Medical insurance of INR 500K is what I pay for out of my pocket. Medical insurance from employer is over and above this. My insurance is not inflation indexed. I have not found any insurance company providing a higher insurance coverage than INR 500K.

"7. What kind of rental returns are you getting on your houses? Rental returns are very poor here in Bangalore, and I find most home owners are counting on property appreciation, with the hope of being able to find a buyer at the end of 10-15 yrs for their apartments. Quite a bit of risk involved in this strategy in my opinion, particularly for apartments/flats." Regarding the risk of not being able to finding a buyer, please refer to my reply to walkinwood. Net rental return in Pune is between 3.5 to 4.0%
I had missed your point on inflation. Google 'India economic outlook 2030'. This article projects inflation to be at 4% till year 2030. However, considering the current situation, it seems highly unlikely for India to bring inflation down to 4% and more so to sustain it at that level. So I have gone with 8% inflation.

I tried searching for inflation projections beyond 2030, didn't find anything.

Regarding SWR, I did some reading. Most articles recommend 4% SWR to make nest-egg last for 20-25 years. Bringing SWR to 2% will almost double the life of nest-egg, assuming other variables remain unchanged. Bottom line is that in order to maintain the pre-retirement standard of living, and to bring SWR down to 2%, I will have to either double my nest-egg or improve ROI!!

So, I re-did my projections/calculations and here's what my projections are based on:

1. We (DW & I) will have INR 40 million and 2 houses (conservatively about INR 7.5 million each) on our 45th birthday. So nest-egg starts growing starting our 45th birthday

2. Inflation assumed at 8% p.a. from now till 2081 i.e. till we turn 100

3. I will NOT retire literally at 46 but will retire from an always-run-after-money kind of lifestyle. In which case I plan to work at a managerial level for 10 years i.e. till we (DW & I) turn 56. By doing so, we can ensure that we don't have to touch our nest-egg for at least as long as I continue to work. Best part is that I will not have to work for more than 8 hours a day and 5 days a week and allow my nest-egg to grow at least @ 10% (I shall learn to invest in stock market if need be, I got 15 years to cross that bridge!)

4. Rental income continues to flow in from one of the two houses we would still have.

5. I retire completely on 56th birthday (year 2037)

6. We begin to draw from our nest-egg beginning 2037

7. Beginning 2037, we downgrade our lifestyle to bring our expenses down from a INR 61.5K per month to INR 40K per month (basically less shopping, cheaper vacations and no eating out at fine dinings )

8. All of the above is assuming that we continue to live in Pune which is one of the most expensive cities in India

Going by the above plan, we will be left with 2 houses and no cash when we will turn 99!!

Plan B includes:

1. Moving to a cheaper city at age 56

2. If things still don't work out, we will still have 2 more houses to fall back upon i.e. by either selling the houses or reverse mortgaging them.

It would be keen to know your thoughts on this!!
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