Retirement Planning for Young Businessman – Case Study

Recently Vanity Fair Magazine named Mark Zuckerberg founder of Facebook as world’s most influential person & TIME magazine selected him as person of the year.  He is just 26 years old. We all are inspired by founders of Google – who are ruling the world at such tender age. We can find similar examples back in India – Sabeer Bhatia shook the world when he was just 28 by introducing web based mail ‘hotmail’. Even now on and off, we keep hearing that some guy from IIMs rejected a big CTC offer to start his own venture. There is a whole new breed of entrepreneurs who are ruling this information age world by their out of the box concepts.

Following the same line Md. Zeeshan started his tech company when he was just 23 years & was just pursuing his engineering at that time.   Now he is 26 years & his company has grown to a decent size with close to 100 people working for him across the globe. I would like to share he is not from business background as his father is a government employee. Zeeshan has built the whole business at his own.

Now he is planning to retire at age of 40. He clearly understands that retirement is about having money & not about age. In Mr. Zeeshan’s own words “By retire I don’t mean the literal retire; I want to retire from day to day compulsory working. I want to earn enough from my passive income than from active income, so that I work because I like to work, and not because I have to work.”

Goal: Retirement at age of 40. His retirement goal is he should get Rs 5 Lakh every month after retirement & Rs 25 Lakh as medical corpus at the time of retirement.

Assumptions: He is assuming inflation of 7% before retirement & 6% after retirement, return from debt related instruments 8% & Equity 13%. Right now he would like to plan for life expectancy of 70 years for him & 75 years for spouse who is 2 years younger to Zeeshan.

Risk Profile: Mr. Zeeshan’s risk profile shows that he is aggressive investor – he understands lot about investments but lack in practical experience. As he is young – I have suggested him to start with Asset Allocation of 70:30 for equity-debt & keep it reducing till retirement. After Retirement he can reverse the asset allocation with 70% of amount lying in debt instruments at that time.

Financial: He already has savings of close to Rs 2.5 Cr which are mostly in traditional debt instruments – he wants to use half of it for retirement goal. His current annual withdrawals are Rs 1.5 Cr which he is expecting to grow at 15%-20% for visible period. He would like to use close to one-third of this current income for his retirement goal with every year increase of 15%. Rest of the cash flows he would like to use for day to day expenses, other goals & expending business.

Retirement Corpus Required: His current requirement of Rs 5 Lakh per month will actually turn into Rs 13 lakh in next 14 years due to inflation impact. His portfolio after retirement will be able to generate approximately 9.5% of returns. And to achieve this goal he needs close to Rs 25 Crore as retirement Corpus. Other than this he needs Rs 1 Crore as medical corpus at the time of retirement – assumed 10% medical inflation till retirement.

Retirement Cash Flow

Accumulation for retirement goal: According to the asset allocation chosen we can expect a return of 11.5% on his Retirement portfolio. To achieve his goal he needs to invest Rs 1.25 Crore as one time & Rs 30 Lakh per year with growth of 15% every year in the savings.

Accumulation Cash Flow


When I discussed the plan he is happy with that & would like to implement as soon as possible. We also recommended him to have substantial insurance through term plan & comprehensive accidental policy to avoid any negative consequences.

For other young readers – One should not think that he/she is too young to start thinking of retirement (after all we are not Rajnikanth who can defy age and health problems). We just want to say that even a very small contribution towards retirement corpus at this stage would make for a huge amount at the time of retirement, as you have the POWER OF TIME in hand. At later stage, time cannot be compensated through investing huge amounts also.

Mr Zeeshan’s retirement plan reminds me of a quote from famous book ‘How to retire Happy, Wild & Free’ – “ If I’d known that retirement was going to be this good I’d have done it the day after I left school !!!”