Long Term Goal

Since you offer no details such as current income or required income at retirement, you will not receive anything specific enough to really guide you, just attempts to understand more.

Since you are outside the US, we might not have an understanding how any government retirement accounts work for you. Here, Social Security can cover some portion of retirement needs, depending on income and years worked. At 45, one is too far from drawing on that benefit to work it in to any equation.

In general, the advice to save 10% of one's salary, and having some match from one's employer, along with an 8%/yr return, will offer a decent retirement at age 62 or so. To me, this is a starting point, since it targets a final withdrawal rate that replaces 80% of final income, and makes assumptions for each variable that cannot be known (e.g. the rate of return, annual salary increase and inflation both set to 3%, etc.) I offer this spreadsheet, both online and downloadable at

at the bottom of the article. Again, it's just a start. To cut one's working years in half would require a much higher savings rate, or a return that would be far better than the 8% I assume.JOE

At 26 how would you what will happen when you are 45? And why do you think you will not want to work after 45?

Let's assume you want a $50,000 lifestyle starting at age 45 and you'll retire for 40 years. Assume cost of living inflation to be

3%. Assume you send your last dollar to the electric company and die.

If you get a 12% return on your money you need $800,000 the day you retire. If you get a 9% return on your money you'll need $1,075,000. If you get a 5% return on your money you'll need $1,750,000.

This is the back of the envelope calculation.

Spreadsheets are wondeful!

Good Luck to You!

Looks like you are not in US but in India. The rules are little different there. One thing is common though that you have to start saving early and let the compounding work.

Indian market is booming and so typical index funds returns pale in front of mutual fund returns. So in Indian market it is better to invest in actively managed funds and if you can spend time then in individual stocks too. There are lot of inefficiencies in the market and the money managers can tap to get extremely good returns unlike in US where its a very hard thing to do, this being a more mature market. Returns of 30% per year not uncommon for the past few years.

Word of caution though, the market is extremely volatile and so you might want to keep a larger portion in safer investments such as bonds and FD's (CD's in US). Also beware of crooks as there are lot ofget rich quick type money managers out there. Preferably do it yourself. Read read read a lot and Good luck

I can't speak for the OP, but I'd translate "do not want to work after 45" as shorthand for "want financial independence when I'm

45 so that whatever I'm doing, making money doesn't have to be a priority". Whether that means he wants to surf or it means he wants to volunteer or he wants to find a second career, perhaps in a less lucrative field, there's no reason *not* to aspire to financial independence. Who doesn't? The real question is whether he can manage to save enough during the next 19 years without having to sacrifice too much of his current quality of life along the way. 26 - or earlier - is *exactly* when one wants to start planning and working hard on it if one wants to achieve that before traditional "retirement" age.

That all said, with the Rupee at about 40/USD, if he's actually putting that much away each month - about $575/mo - and it grows at a cost-of-living/inflation-adjusted rate of, say, 7% per year (reasonably conservative, though not quite so when considering that it's after-inflation), he'll have the equivalent of some $300,000 (in inflation-adjusted money) after 20 yrs. Who knows how that'll work out in India in 20 years, but it'd make for a pretty rough "retirement" here in he US. If we assume that at that point he starts taking 4% annual distributions, that nest egg throws off about $1000/mo (again, - in inflation adjusted current purchasing power).

On the other hand, if, at 46, he's saved that much and never puts in another cent - suppose he downshifts to some other job which pays just enough for him to get by but not enough for him to keep cranking away the savings - perhaps a part-time job or something - by the time he's 66, that nest egg will continue to grow to some 1.2 million dollars equivalent - very likely enough to fund a decent retirement - after having spent that second 20 years of his working life *not* having to worry about saving for retirement anymore and perhaps doing something he likes a lot more than what he does now.

Anyway, this is all just quick and dirty speculation - we obviously know nowhere near enough to do more than that. But it's kind of fun to play with the numbers, anyway.

wrote

Just saying: I am a U.S. citizen, along with I bet the majority of regular posters here. All are well-versed in the merits of diversity, but this is typically with overwhelming attention to the historical behavior of U.S. markets and U.S. mutual fund companies, U.S. brokerages, etc. I hesitate to comment on those who are citizens of other countries and investing from a locale within those countries. U.S. markets are more mature, but also they are, it seems to me, fairly reliably regulated. Can we say the same about, for one, Indian markets or companies that invest on behalf of individuals from within India? Inflation can go rampant in countries lacking "maturity." As recently as the 1980s, for example, Israel saw inflation rates in excess of 100% a year. The first time Israel inflation fell to the single digits since 1970 was in the mid-1990s. Inflation is a significant consideration for those investing for the long term in the U.S. Just the uncertainty of inflation by itself is enough to give me pause when making suggestions to someone in another country.

I totally agree that inflation is a big risk. And like you said in booming overheated markets inflations can be very high too. But having said that, one has to have some strategy of investing for long term. If inflation goes like it did during great depression then no ones is safe. However one cannot and should not stop planning for retirement. Just my $3.00, taking inflation into account.... .... :)

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I'm not sure what you mean by inflation in the great depression. The great depression was a time of deflation, not inflation. For example, the CPI was 17.1 in January, 1929, dropped to a low of 12.6 in 1933, and was not back up to 17.1 until 1943, well into World War II.

What characterized the great depression was a shortage of money. Debtors frequently were wiped out when they could not repay it. On the other hand, people who had money (creditors) often did very well.

This would suggest that people should plan to be debt-free before they retire. Speaking from experience, having some investments and no debt gives a good sense of security.

Dave

At 26, I didn't want to work when I was 26. Today -- at 38, I don't want to work when I'm 38.

The odds are in favor of the answer being: At 45, I won't want to work at 45.

My original goal was 40. I'm there today at 38. I don't have to work another day in my life and I wouldn't have to change my lifestyle one bit to continue for the rest of my life (assuming, of course, no worldwide economic/financial melt-down, in which case we're all doomed, no matter how careful and redundant our planning and preparation).

Unfortunately, as the original goal of 40 is quickly sneaking up on me, we've (wife and I) pushed it back to 45 in the last couple of years.

Why?

It all boils down to this question: How much money is "enough".

For me, no matter the situation, no matter how much I've got right now, the answer always seems to be "... just a little bit more than we've got right now."

We kinda stepped back and said "OK, we've got enough to live on in perpetuity right now, but lets give it another 5 years _just_in_case_).

It's quite likely that I'll retire at 45 and before my 46th b-day I'll be knee-deep in something else just 'cause I won't know what to do with myself all darned day. It's probably more likely that I'll turn 45 and we'll still be thinking " ... just a little bit more than we've got right now ..."

.

Also, you can consider partial retirement instead of full retirement. Such as running some easy, fun, low profit business a few hours a day. Does not have to be fancy, for example it could be consulting in your area of expertise.

i