How Much Will You Leave Behind?

If you are 40, save ₹ 1 lac pm, have a networth of ₹ 1 Cr, you are likely to accumulate assets worth ₹ 26 Cr at 60 assuming that your savings increase by 10% pa and your assets grow at the same rate. 

Is this sufficient to meet your expenses post earning years? 

Let’s say you estimate that your expenses are going to be ₹ 80k pm at current prices (your estimate is based on the assumption that you will not have to spend for your children, your lifestyle would not be as glamorous, you may decide to move to a smaller, quieter place etc). Assuming 10% inflation, your expenses at age 60 will be ₹ 5 lac pm. Continuing with the assumption that your assets grow at 10% pa and so do your expenses, you will have adequate money till the age of 100. If you estimate your life expectancy as 95 years, you will leave behind assets worth ₹ 96 Cr. This amount may not look as big then as it looks today, because your expenses would have increased to ₹ 16.5 Cr pa.

After knowing this and given what we see today, you might say that I wouldn’t want to stop earning at 60. I would like to continue earning at least enough to meet my expenses till the age of 70. Well, if you do so, your assets keep increasing @10%pa without any withdrawals for 10 years. Your assets at 70 will be ₹ 67.5 Cr and as you stop earning, your expenses would have increased to ₹ 1.68 Cr pa. Considering all other variables same as above, at 95 years you will leave behind assets worth ₹ 1185 Cr

₹ 1185 Cr will not be a small amount even 55 years later. If the assumptions appear reasonable to you, you must begin thinking, “I am going to leave behind a sizable inheritance. Do I want to let it provide a sense of security to my descendents or do I also want them to be used for a larger purpose or charity?” 

If the assumption of 10% pa inflation and/or asset growth seem unreasonable and you would like to revise them, get on to the excel sheet and do your own calculations. 

Being prepared for the future is always better than otherwise. 

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