Money Wise: Aam Aadmi's Guide to Wealth and Financial Freedom

by Sharath Komarraju

real rate of return from your corpus. In this example, it will be 12 – 10 = 2 per cent. The idea now is that since you know that you can earn a real return of x per cent on your corpus, you can theoretically just skim the excess x per cent off the top every year for your living expenses and keep the corpus untouched. That way, at least in theory, your corpus stays undiminished forever, whether you are retired for ten years or a hundred. An example: Say my corpus is worth five crores. My estimated rate of return is 12 per cent and my estimated inflation figure is 10 per cent, which leaves me with a real rate of return of 2 per cent. So by the end of Year 1, my corpus will be worth 5.6 crores (5 crores + 12 per cent return). I withdraw 2 per cent of the original 5 crores, that is, 10 lakhs, to fund my retirement lifestyle. And the