Is 1 Crore in the Bank Enough for Retirement?
Most people strive to make a million dollars in their lifetime. While it is true that a million dollars is not what it used to be, there are still only 36 million millionaires in the world. That is just 0.5 percent of all the people in the world. In the developing world, most specifically in countries like Sri Lanka, a sum of 10 million rupees seems to be the magic figure. If you put 10 million rupees or 1 crore in a bank for a fixed deposit, you will get a return of 10 percent on your money. This works out to 1 million rupees a year or 83,333 a month. Now is this enough for retirement?
While it is true that this is not the 18 crore rupees that a million dollars works out to, 10 million rupees is still a substantial amount in the third world. If you were turning 65 in 2019 and had 10 million rupees, then you are more than covered in terms of retirement. What I mean is 10 million in the bank. This does not include the valuation of your property or business holdings.
Let’s look at the different expenses you are bound to incur and how you will fare with 1 crore in the bank at different time periods (now, 10 years later, 30 years later).
This is a basic necessity. Food, water and clothing are the others and are discussed below. Education, healthcare and internet are modern basic needs of life. According to data on Numbeo, a person needs on average 20,000 rupees per month to rent out a 1-bedroom apartment outside Colombo city. So one-fourth of your income goes towards rent. You obviously can’t be living with your kids at this time so this makes the most sense. In 10 years, I expect this sum to hit 40,000 rupees per month. So you’ll want to consider owning a three or four-bedroom property to live with your kids and cut down on rent.
Food is getting more expensive. For your breakfast, lunch, tea and dinner, you’ll need to set aside about 20,000 rupees a month. For breakfast, you could have bread, butter and jam which will cost you around 150 rupees. If that bores you, you can head to The Fab or Caravan Fresh and have two items for that amount. Lunch will cost about 200 rupees at Khushmi Foods or your neighborhood bath kade. For dinner, you can get the same thing at Abi Foods in Wellawatte it will be around 200 rupees for two parathas and a chicken curry. And don’t forget you have to have your daily intake of fruit also. Let’s hope you live close to places that offer you affordable meals if you can’t cook.
You no longer need to go to work, so a t-shirt and jeans works perfectly fine. I will budget about 5000 rupees a month for your clothing needs. This works out to a decent t-shirt and pair of pants. That should be sufficient.
There is nothing much to say here. Your internet needs are covered for 2000 rupees a month.
As an elderly person, this is something that you need to be putting a lot of money and time into. I would set aside 5000 rupees a month for medical reasons. This should be good enough.
You’ve already done your degree and everything else. So there is not much to spend on here one would hope. But with most Sri Lankans (>96%) not having a college education, you may want to do something for yourself. But it really doesn’t make sense if you have saved up 1 crore rupees. The best you can do now is to sit back and read a good book or magazine. I would budget about 1000 rupees for this every month.
We all need to get out and about occasionally. In your retirement, this is more important than ever. You might be picturing yourself watching TV and generally lying back on your couch. This will get tiresome after some time and you will want to stretch your legs. Visiting relatives and friends and getting food all requires a mode of transport. I would budget about 10,000 rupees a month for this.
Then there is the need to see new places. If you live in Colombo, you may want to explore the Southern or the Northern Province. Or you may want to get on a plane and see Singapore or Hong Kong. Since you have about 20,000 rupees leftover after all these basic expenses, I would budget around 10,000 rupees for travel. You could go to a few places in Sri Lanka in a given year for this amount and stay at some good hotels. If you were to take a trip to the US and stay a month, then you can do that by not going anywhere for two years and have a trip of a lifetime.
So you still have 10,000 rupees remaining every month. You can spend that on whatever you wish. Or you can chip in with these segments. Or you can save and invest to continue your standard of living in retirement.
There are some assumptions here. This is that the interest rate for fixed deposit will be more or less 10 percent through the next 30 years.