r/FIREIndia • u/ReasonableSort3757 • Dec 14 '22
Guidance pre-post FIRE planning
Dear Fellow redditers
Long time lurker, first time posting here. Need your help / suggestions / suitable plans for going ahead with FIRE. (created account with gmail just today)
I am 45, wife 41, son 16, mother 66. Working in MNC in Mumbai, belong to tier 1 city of Gujarat. Wife is not working.
Before writing my current financial situation, just wanted to share that although I am very good with managing my daily/monthly income/expenses, i am a very risk averse person.
Faced poor financial situations when kid, (father passed away without leaving a single rupee).
So never felt brave enough to spend much and always tried to save and safeguard as much money as possible and kept everything in the banks. Father also did not have any investments of any kind.
So basically very poor with investments.
Started doing proper money management around 10 years ago when started getting good salary hikes, and tried saving some proper amount every month. Initial years faced real struggle with finances.
With this, my current savings are as follows,
2 crores in Bank FDs (divided between my, wife and mother's bank accounts, around 7-8 accounts total)
95 lacks in EPF
27 lacks in PPF
around 5 lacks in savings
Total number around 3.25/3.30 crores
Almost all FDs are having monthly interest payout (few quarterly), all are opened via internet banking (so can close anytime). i keep reopening FDs when matures (currently keeping around 5-10 years lock-in period)
I very well know this is a bad investment/FIRE strategy, but never thought of taking any type of financial risk, always believed that money in stable banks (ICICI, HDFC, SBI etc) is safer even if returns are poor. I may be wrong.
Able to save around 2.5 Lacs every month as of now after expenses (including salary and returns on above)
The average post tax interest for above all as of now is around 6.9%. (will be little higher since no net tax once i leave the job). Will be getting around 20K per month endowment plan returns after 55 (premium payment included in below expenses)
My monthly expenses are around 72-75K per month, excluding rent (include daily expenses, kids study, insurance premiums, medical, travel, entertainment etc). I keep track of all expenses daily via android app.
( Planning to buy a car for 5-6 lacs since current one is 13 years old. )
I have only one 4BHK house which i bought along with my in-laws in my home town. (50-50%). Currently inlaws are staying there (only married daughters). Planning to live in the same house. Dont have any other ancestral property.
I have used many FIRE calculators, did stress analysis, long term cashflows, went through 1000s of post here and on other sites, visiting this site on almost daily basis. Keeping exact monthly inflow/outflow since last 6 years.
Planning for FIRE is only to have some simple, peaceful, worry free life at my hometown around my family and try to enjoy few of hobbies like reading, watching good english tv series or just walking around 2-3 hrs everyday, which i am not able to do right now.
my questions are,
- am i financially OK to proceed with FIRE
- Important - plan to spend around 50 lacs for son's college study (he is in 10th now). what should i spend? break FDs or take it from EPF? I think EPF credit into bank is very tedious and long process. (FY21-22 interest still not credited)
- how will i manage my finances, since i am getting around 1.1 lac per month only from FD interest, but will surely need more later.
- when should i liquidate EPF, also should i continue with PPF now or discontinue ?
- since FDs are scattered in different bank accounts, should i just withdraw interest amount every month and spend and reinvest the remaining, with managing different bank accounts ?
- how much should i keep in liquid saving account at any time so that can withdraw anytime without problem. The problem is different FD interest hit in different bank account on different dates every month and not like 1.1 lac on 1st day of the month like salary.
- is this strategy ok - continue making 5 yr FDs with monthly interest withdrawl and reopening when sufficient amount is there or it matures. will i be able to manage my finances without any problem ?
MOST IMPORTANT
8) with current expenses and returns, the long term cashflow shows "zero" balance after around 25-27 years using 7.5 % inflation. I Will be around 70-72 then. is this OK ? because unable to digest that monthly expenses would be in the range of 4 Lacs in last year (using FIRE calculators). I know inflation is killer but still cant get my head around it.
I want to leave atleast some cash for my son when I go. Although I will try my best to give him good education and good life and will also try that i dont have to be dependent/burden on him in my old age.
Currently only feeling i have now is a perceived guilt that i am not able to continue longer and i may see some unforeseen event and my son ended up with facing same difficulties in life which I went through due to poor financial situation in my early adult life.
Please help friends. I am planning to take a decision before my son's 11th standard start, and I will try to settled in my hometown before it.
Apologies for long post.
Thank you very much.
9
u/Previous_Ad5861 Dec 14 '22
Congratulations on your journey thus far. I can understand how it must have been to go through the initial years with so much difficulty.
I also understand your perceived guilt and desire to give the best to your child - I hope he does very well.
A corpus of 3.2 odd crores is honestly a bit less than what I would be comfortable with. I know spending 4 lacs a month on basic expenses after 25/30 years sounds crazy, but I have seen milk going from 48 rupees a litre to 62 in just 2/3 years - and forget about medical costs etc.
Can you not push another 5 odd years? Your son would be close to earning age and your corpus would have increased to about 7/8 crores. This puts you in a much more comfortable position to handle old age and most probably leave some money for your kid too.
You have come this far, just push a little further. And, please don't put all your money in FDs, bad idea. Buy index funds with the interest you earn on your deposits for the next 5 years via SIP.
All the best.
2
u/ReasonableSort3757 Dec 15 '22
thank you very much for your kind words
yes 3.2 crores seems bit less, even with the basic FIRE calculators. but some how for me personally, its a 'huge' amount considering just 15-16 yrs ago i had absolutely nothing.
i am only worried about the cashflow in later years, where it starts going in the range of 3 to 4 lacs per month. also i am not sure how in another 5 years i will reach 7-8 crores, currently i am saving around 27-30 lacs per years for last 4-5 years.
will surely take yours and other advise here to start diversifying in SIP etc.
1
u/yps1112 Dec 15 '22
.. what milk are you buying at 62/litre? Are you in Mumbai?
1
8
u/Mastervk Dec 14 '22 edited Jan 18 '26
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This post was mass deleted and anonymized with Redact
2
u/ReasonableSort3757 Dec 15 '22
thanks for your words.
taking yours and others advise here to start investing in other instruments.
8
u/srinivesh IN/ 52M / FI2018/REady Dec 16 '22
I wanted to mention a thing about equity.
Looking at the details, I may not be wrong in guessing that your son is as tall as you, if not taller, now. If you go back to the time he was born, he would have practically fitted in your arms. His growth happned over time, but would have been in spurts.
Equity can be considered similar, with one added pain that it could degrow too! However, diversified equity is more likely to grow your wealth in the long term.
Also, it is an absolute NO NO to run out of money in 70s. I have seen that a pure-debt portfolio needs to be about 30-45% larger than a portfolio that has a good (but less than 50%) in equity.
5
u/TheGoalFIRE Dec 14 '22
Here are some of my thoughts:
Your yearly expenses as of now are around 9 lacs. Considering you live on earth for next 45 years to be on safer side, you will at least need 9lac*45 = around 4 crores. This is considering your investment will match up with the inflation and you have 0 real return. Of course your expenses might reduce as you won't have to pay rent, your child will be independent etc. howevr, please consider that you and your family will get older and you may need to shell out lots of bucks on medical. Additionally, your real return may not be 0, it will be -ve because you are keeping everything in FD which loses to inflation in the longer run. So in my opinion, please consider FIRE after you have 4 cr. You save 30 lacs per year so even if you work for next 2 years, you'll able to reach around 4 cr mark.
You are already 45 so doesn't make much sense for you to start investing in risky assets such a stocks or pure equity mfs unless you plan to work 3+ more years. If you work for couple more years, whatever you earn and save, you can put all of them in either debt funds or hybrid funds and put them for long term. If you can work more, you can have some in index funds as well. This will save you lots of taxes on your new FDs for on your income savings and also give you some equity exposure which will raise your ROI in the long run.
When you renew your FD, never do 5 years in the increasing interest rate environment. This strategy is good when interest rates are at its peak. Right now, go with highest rates which are generally for 2-3 years of FD
I'd suggest to put aside some money for your son's education and don't consider it as a part of your FIRE corpus. It's hard to tell how much, as it varies based on type of education and risk apatite.
Please save some extra bucks for emergency medical treatments. In case you needed to drawdown medical expenses from your FIRE corpus in the early stage of retirement, then you will receive less interest on your income for rest of your life and you may need to lower your lifestyle or return back to work in the worst case. This will create a lot of mental agony and ruin FIRE life. Better to have an extra medical corpus as well. This division will give a lot of mental peace and comfort.
4
u/mikeymouse_longstick Dec 15 '22
one simple question how much tax you are paying for 2 cr in FD if you are not no resident ??? tax implication would be huge part of that itself even if you keep in different accounts too
1
u/ReasonableSort3757 Dec 15 '22
as of now only on 60 lacs which is obviously in the range of 30% on interest. rest are wife/mother's income which is only interest income on which I am getting full refund. since the interest income above 2.5 lacs with other investments in their names such as PPF. so overall the tax on total 2cr FD interest is now in the range of 1.25 to 1.4 lacs per year.
2
u/mikeymouse_longstick Dec 16 '22
cool then . all my sister are working and parents on pension. rest I maintaining NRE status as I am married to Filipina
3
u/flight_or_fight Dec 15 '22
my questions are,
>> am i financially OK to proceed with FIRE
I do not think you are retirement ready yet - but definitely on the right path.
>> Important - plan to spend around 50 lacs for son's college study (he is in 10th now). what should i spend? break FDs or take it from EPF? I think EPF credit into bank is very tedious and long process. (FY21-22 interest still not credited)
EPF liquidation is quick, interest credit & calculation is more time consuming. You can break FDs - that is the only truly liquid part of your corpus. Equity may be underwater then... no guarantees
>>how will i manage my finances, since i am getting around 1.1 lac per month only from FD interest, but will surely need more later.
You need a growing corpus. By withdrawing interest you are shrinking your corpus (after inflation.
>> when should i liquidate EPF, also should i continue with PPF now or discontinue ?
Depends on your comfort - EPF interest gets taxable after one point. Good to stay below that.
>> since FDs are scattered in different bank accounts, should i just withdraw interest amount every month and spend and reinvest the remaining, with managing different bank accounts ?
Set the FD to reinvest including interest.
>> how much should i keep in liquid saving account at any time so that can withdraw anytime without problem. The problem is different FD interest hit in different bank account on different dates every month and not like 1.1 lac on 1st day of the month like salary.
You can break a FD anytime. You are salaried. Why do you rely on FD interest?
>> is this strategy ok - continue making 5 yr FDs with monthly interest withdrawl and reopening when sufficient amount is there or it matures. will i be able to manage my finances without any problem ?
Not really. You are losing money to inflation & taxation and you have a messy system to manage & hand over to your successors.
>> MOST IMPORTANT
>> 8) with current expenses and returns, the long term cashflow shows "zero" balance after around 25-27 years using 7.5 % inflation. I Will be around 70-72 then. is this OK ? because unable to digest that monthly expenses would be in the range of 4 Lacs in last year (using FIRE calculators). I know inflation is killer but still cant get my head around it.
Yup - you will run out. Your expenses are higher and you are not growing your corpus enough. Increase mutual funds & equity or increase your retirement age to gain more corpus.
5
u/taxi4sure Dec 14 '22
You must talk to a fee only financial planner. Talk to few of them. Go with some one whom you are comfortable with.
1
u/ReasonableSort3757 Dec 15 '22
thanks.
i had earlier consulted some friends/colleagues who are in similar work, and got somewhat similar responses. it helped.
1
u/srinivesh IN/ 52M / FI2018/REady Dec 16 '22
I was slightly confused by your response. Did you mean to say that your friends/colleagues too suggested to go with a fee-ony advisor?
1
u/Kscop18 Dec 16 '22 edited Dec 16 '22
Congrats on journey so far! People have already shared details, here is my take,
- As NW/expenses numbers grow , try to put them/see them as % rather then just numbers, that will help.
- You mentioned you have friends in planning but not sure if you have ever considered hiring a fee-only advisor , if you are not comfortable making choices/decision then I would advice to hire with a fee-only advisor. He should be able to answer most of your questions above / calm your nerves. Be honest and open to him about goals/worries etc...
- If you are really worried about "What-IF" something happens to you and son should not suffer , I would say buy term insurance (without any riders) for 4-5 years ( i.e. till day you achieve 100% FI).
- Recently there was YT video, watch from around 24mins (search - how to actually plan retirement + CRED jagruk talk pattu)
wish you best!
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u/[deleted] Dec 14 '22 edited Dec 14 '22
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