Is Rs 5.6 crore enough to retire? Bengaluru founder says think again and shares two key warnings
In today's fast-paced world, the idea of retiring early is no longer just a dream for the lucky few, it's a growing ambition among working professionals who crave more control over their time, energy, and lifestyle. Whether driven by burnout, personal passions, or the FIRE (
Financial Independence
, Retire Early) movement, the conversation around
early retirement
is getting louder. But in this era of rising costs and longer lifespans, are we relying too heavily on old thumb rules that might no longer fit?
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Bengaluru-based founder Anmol Gupta has a word of caution, don't use the popular 4% rule as your sole compass to plan retirement, especially if you're eyeing an early exit from the workforce.
What is the 4% rule?
At its core, the 4% rule suggests that if you withdraw 4% of your investment corpus every year, your money should last about 30 years. In simpler terms, if you have saved 25 times your annual expenses, you could theoretically retire and sustain your lifestyle.
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For instance, if your annual expenses are Rs 10 lakh, then accumulating Rs 2.5 crore (Rs 10 lakh × 25) would, according to the rule, be enough to see you through retirement.
Sounds reassuring, right? Not quite, and that's where most people go wrong.
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Why the 4% rule isn't one-size-fits-all
Gupta highlights two crucial flaws in applying this rule blindly.
1. It assumes a 30-year
retirement
window
The 4% rule is best suited for those retiring at the conventional age of 55–60, where the retirement span is roughly three decades. But if you're planning to retire in your 40s or even 30s, you're looking at 40–50 years without a steady income. In that case, 25x your annual expenses may fall dramatically short, you'll need a significantly larger corpus to avoid running out of money later in life.
2. It ignores the impact of inflation
One of the most common mistakes while calculating retirement needs is using today's expenses instead of forecasting inflated expenses at the time of retirement. That's a critical oversight.
Let's break it down with an example Gupta shares:
- Current expenses: Rs 50,000/month (Rs 6 lakh/year)
- Current age: 30
- Target retirement age: 55
- Inflation rate: 6%
Using the Rule of 72, which states that your expenses will double roughly every 12 years at 6% inflation, your Rs 6 lakh/year
expense
will become around Rs 24 lakh/year by the time you're 55. That means your retirement corpus should not be based on Rs 6 lakh/year, but on Rs 24 lakh/year.
Applying the 4% rule then: Rs 24 lakh × 25 = Rs 6 crore.
So, if you're aiming to retire at 55, you'd need at least ₹6 crore — not ₹1.5 crore as the unadjusted 4% rule might misleadingly suggest.
Ditch the thumb rule, embrace smart tools
While the 4% rule might serve as a good starting point or a back-of-the-napkin calculation, Gupta urges individuals to go beyond it. In an age where AI-powered financial planning tools are just a few clicks away, why rely on decades-old shortcuts?
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