Lesson 4 of 4, 5 minutes
Big expenses and other income
A wedding, a home, a pension, rent. What each one does to the date and the number.
Monthly spending covers rent, food, and the phone bill. It does not cover a child's degree, a wedding, a new roof, or the deposit on a home. Those arrive once, they are large, and a plan that leaves them out gives a date that is too early.
Income has the same gap on the other side. A pension, rent from a flat, or a few years of part-time work all pay part of your spending without touching the corpus. A plan that leaves them out asks you to work longer than you need to.
A big expense before you retire
Take a cost of ₹24.00 L at today's prices, due when you are 45. By then it will cost ₹57.52 L (₹24.00 L in today's money). It comes out of the corpus in that month, and the corpus loses the amount and every year of growth the amount had ahead of it.
| No big expense | FIRE at age 65 |
|---|---|
| One expense at 45 | FIRE at age 66 |
An expense before retirement moves the date. It does not change the FIRE number. The number is what you need on the day you stop, and by then this cost is behind you.
A big expense after you retire
Now put the same cost at 70. It can no longer be paid from a salary, so the corpus has to hold it from the first day of retirement. It raises the FIRE number.
| No big expense | ₹5.46 Cr |
|---|---|
| One expense at 70 | ₹5.79 Cr |
The rise is smaller than the cost. The money set aside for it keeps earning until it is needed, and that does part of the work.
Income that starts later
Say you expect ₹32,000 a month at today's prices from age 60, and that it keeps pace with prices. From that birthday you withdraw that much less every month.
| Retire at 58, no other income | ₹5.46 Cr |
|---|---|
| Retire at 58, with the income | ₹3.89 Cr |
| Retire at 50, with the income | ₹4.78 Cr |
Look at the last row. Retiring earlier leaves more years before the income starts. The corpus has to pay for every year of that gap in full. This is the part of early retirement that a pension does not help with.
What to be careful about
The calculator assumes the income rises with prices every year. Some pensions and rents don't, or don't fully. If yours is fixed, enter a lower amount than the one on paper. It also assumes the income arrives for the rest of the plan. Rent stops when a tenant leaves, and part-time work stops when you do.
Do this week
- List the one-time costs you can see coming in the next 30 years. Give each one an age and a cost at today's prices. Put the three largest in the calculator.
- List every source of income you expect after you stop working, with the age it starts. For each, check whether it rises with prices.
- Count the years between the age you want to retire and the age each income starts. That is the gap your corpus has to cover alone.