How much money does one really need to achieve financial independence—Rs 5 crore, Rs 10 crore, or Rs 20 crore? This is a question that often lingers in the minds of individuals planning their retirement.
Market expert Gurmeet Chadha, Managing Partner & CIO at Complete Circle, offered a straightforward calculation to help people arrive at the “right amount” needed for their retirement corpus.
In a recent post on X (formerly Twitter), Chadha addressed the dilemma by linking financial independence directly to current lifestyle costs. “The right amount is the derivative of current monthly expenditure, which has stepped up 5% every year,” he wrote.
Chadha explained that the benchmark lies in ensuring that a portfolio’s returns are sufficient to cover monthly expenses. According to him, “If 6% of your portfolio can match your monthly expenditure – that’s the right amount.”
To illustrate, Chadha shared an example: “If your monthly expense is 2 lac rupee.. then 4 cr+ is your retirement corpus.. (6% of 4 cr is 24 lacs annually/ 2 lac monthly).”
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The seasoned financial advisor highlighted that a clear understanding of one’s expenses forms the basis of calculating financial freedom. “Calculate your expenses – that’s the starting point… be liberal while doing the maths,” he advised, underscoring the importance of being realistic and slightly generous in estimating future costs to avoid shortfalls.In his post, Chadha also touched upon a broader reflection from one of his clients who observed how wealth accumulation often outpaces the ability to enjoy it. “We end up earning/making far more than we and our children can spend on forgetting how to live,” the client remarked, a thought Chadha echoed in his discussion on financial independence.By laying down a simple formula, tying monthly expenses to corpus size via portfolio returns, Chadha has provided an accessible framework for individuals grappling with the complex question of “how much is enough” for retirement.Also read: HAL, among other defence stocks in focus after Govt clears Rs 62,000 crore Tejas Mark 1A deal
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)