How Much to Save Now for a Stable Income of 1.5 Lakhs Per Month After 15 Years?
When clients seek advice on how much to save for a secure post-retirement income, it's a complex query. The key objective is to determine the monthly savings required today to ensure a steady income of 1.5 lakhs (150,000 INR) per month from the age of 45 to 85, adjusted for inflation.
Practical Investment Strategy
According to our calculations, saving Rs 1 lakh (100,000 INR) per month now at a return of 12.5% annually would generate a corpus of 4.6 crores (46 million INR) by the age of 45. This corpus would then provide a stable monthly income of 1.5 lakhs adjusted for an 8% annual inflation rate.
Complexities in Investment Calculations
However, calculating a precise amount to save monthly is challenging due to the unpredictability of investment returns over the next 15 years and beyond. Assuming a constant 9% return over 15 years, one needs to save approximately Rs 52,853.32 (52,853.32 INR) per month to accumulate Rs 2 crores (2 million INR) by 45. With a 9% return, this corpus would generate a monthly income of 1.5 lakhs (150,000 INR).
Challenges and Assumptions
It's important to consider several factors before making investment decisions. Tax implications, variable interest rates, and inflation are all critical factors. Historically, banks offered better interest rates than they do today, with interest rates peaking at around 15% in a few years. Currently, it takes 8 years to double money at 9% interest, and this trend may continue as interest rates are predicted to fall in the long term.
Therefore, it is highly unlikely to achieve a 9% return on fixed deposits (FD) in the next 15 years. A more realistic assumption might be a 6% or even lower rate. If the interest rate remains around 6%, the necessary monthly savings would increase significantly. Hence, individual financial plans can easily be disrupted unless sound professional advice is sought.
Professional Guidance
The best approach is to consult a professional financial planner or investment expert. They can evaluate your specific circumstances, including tax implications, inflation rates, and potential variable interest rates, to provide a tailored plan.
Alternative Investment Avenue
If you are investment-ready and seek quick results, consider a fixed deposit (FD) scheme. Staggering your FD investments over the next 14 years will ensure you benefit from compounded interest. For example, investing 1 crore (10 million INR) in FD at a 10% interest rate now would provide a corpus of approximately 1.67 crores (16.7 million INR) in 14 years. With this, you can enjoy a monthly income of 1.5 lakhs (150,000 INR) once the FD matures, provided the interest rate remains around 9%.
Remember, the interest earned from your FDs over 14 years will be well-utilized, allowing you to invest in other opportunities while securing your financial future.
In conclusion, while the given calculation provides a theoretical framework, it is essential to factor in variable returns, inflation, and tax implications for a robust financial plan. Seeking professional advice is crucial for achieving long-term financial stability.