When are you truly ready to retire? According to Dhirendra Kumar, CEO of Value Research, financial independence begins when your investments can sustain your expenses, beat inflation, and cover health emergencies – without you needing to work.
In a conversation on Investors’ Hangout, Kumar explained that being “retirement ready” means being able to live off the returns from your investments and pension while keeping a buffer for inflation and rising healthcare costs.
“If your income – that is, the return on investment and pension – is invested in such a manner that it can grow. You are consuming 90% of it, and saving 10%, and it is invested in such a manner that it can beat inflation over a period of time, it can support rising inflation, your current expenses are met, and you will not be in a crisis because your medical expenses are completely covered…you are financially independent,” he said.
When asked how people can check if their savings are adequate, Kumar offered a simple calculation – the 350x rule. “I normally don’t suggest a thumb rule,” he said. “But I would suggest a thumb rule that the money that you need at the time of your retirement – the money that you are likely to consume – if a person does not have a pension and medical insurance, then you need to plan for it by a very broad rule that you need 350 times of your monthly expense requirement.”
He illustrated the point with an example: “Somebody needs Rs 70,000 a month – multiply it by 350. That is 350 months’ worth of capital and invested well, maybe a third or 40% of it in equity, so that you are able to build a portfolio which will be able to beat inflation over a 15–20–25 year period. And that will add up to something like Rs 2.45 crore.”
According to Kumar, this figure is a middle-ground estimate: “Now 350 times of your monthly expense requirement is a fairly middle of the road. I would not say very generous because your dynamics will change. It depends on your health condition. It depends on your expense inflation in retirement, your lifestyle requirements.”
“If it is Rs 50,000 then you need Rs 1.75 crore – that is 350 times. So, broadly keep this in mind, but these are very ballpark, these are broad rules – good to have. But it entirely depends on your situation.”
The Value Research CEO also shared a pre-retirement checklist, warning that financial readiness isn’t just about a number but about mindset and preparation. “By and large, have a sense of what your monthly expense is, and what your annual expense is, which cannot be structured in a monthly format. Non-regular annual expense – that is something which does not cross our mind because it is not regular.”
“Make sure that you have health insurance. If you still have dependents, having that life insurance till you can have it, and then making sure that you have a part of your money invested in such a manner from which you are not deriving income, but it is there to grow in such a manner that it can support a higher income.”