# Would you clarify how the savings would grow to 2.90 Crores in your retirement planning article

I read your article, it was thought provoking & my clarification required is as follows: I would like you to tell me as to how is the weighted average calculated, how the savings would grow to Rs. 2.9 Crores & how long last it will last as shown in first column. If you could show it in an excel as to how the savings would grow to 2.9 Crores and how long the same would last based on your example, then It will be make us understand your presentation more effectively?

Aug 23, 2016 by Vivek Sethi, Bangalore  |   Retirement Planning

As per the assumptions stated in the article, the post tax weighted average returns of 20% equity and 80% debt asset allocation, works out to be = (20% X 15% + 80% X 5.6%) = 7.5%

We do not have a singular equation, which shows how the savings grew to Rs 2.90 crores by retirement. The conventional FV formula in excel could not be used, because we assumed that, the investor will be able to save more every year because he gets a salary increment. While you cannot use the conventional FV formula, you can easily set up an excel spreadsheet model to calculate the accumulated retirement amount. The key assumptions are that, you start at the age of 22, the starting savings is Rs 30,000 per year, you save additional 10% every year, your retirement is at the age of 60 and your compounded annual return on investment is 7.5%. You calculate the retirement FV for your savings each year, add up all the FVs and you will get the retirement corpus of Rs 2.9 crores.

Similarly, you can set up an excel model, for withdrawals based on the assumptions mentioned in the post, and you will get the results that you see in the post. Unfortunately, we cannot share the spreadsheet models that we have used, because it has intellectual property rights implications for our stakeholders. However, we think, the models are not very difficult for you to build it yourself, if you have basic excel modelling skills and a decent working knowledge of excel formulae.

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