The Unity Study

The Trinity Study for India, but by a single

person
Setting the stage
A normal person will have a retirement roughly as long as their career.

You spend as much time not-earning as you do earning

And hence, retirement planning, and financial advisers

Savings rate (SR) ● At 25% SR, you are funding 1 year of retirement every 4 years*
● At 50% SR, you are funding 1 year of retirement each year*
The % of your post-tax take-home income that you can save. You ● At 75% SR, you are funding 3 years of retirement each year*
need to be able to save money before you an invest it. ● At 80% SR, you are funding 4 years of retirement each year*
 POR

1. Save 50% for 30 years in an FD

2. Watch it grow
3. Retire for 30 more years
Thank you!
Why u no FDs bro?
Over the last 23 years, inflation has raged at ~7.5% pa,
whereas FDs have returned ~8.2% pa (without applying
tax)

But time tax is against you

Why u no FDs bro?
Over the last 23 years, inflation has raged at ~7.5% pa,
whereas FDs have returned ~8.2% pa (without applying
tax)

But time tax is against you

After annual taxes, FD will return no more than 5.7% -
7.4% (depending on your income tax slab)

By the time you retire after 30 yrs, you DONT have 30x
your annual expenses saved

Only matching inflation means you’ll most probably run out

of money before you die*.

Or come uncomfortably close to that scenario

Precursor to the
Trinity Study

William P Bengen, 1994 paper:

How much money can I withdraw each
Determining Withdrawal Rates Using Historical Data year from my retirement corpus if I want
it to last 30 years?
Using data from 1926-1976, he said:
 What Is the Trinity
Study?
Philip L Cooley, Carl M. Hubbard,
Daniel T. Walz, 1998

Retirement Savings: Choosing a

Withdrawal Rate That Is Sustainable

Analyse probabilities of not running

out of money for various allocations of
equity and debt for periods ranging
from from 15-30 years

And the answer was that ~4% - increased each year for inflation
SWR of 4% => total retirement savings needed = 100/4 = 25x of annual expenses
How much do I
need to save? - ft.
India
What about India?

Do the results from the Trinity study hold up

for the Indian context?

Channarith Meng, Wade Pfau, 2011 try to

answer this question and claim the answer is
2.91%

Or a savings of >34 years

But they are wrong!
 How much do I
need to save? -
ft. India
Modus operandi:

1. Collect data
○ Sensex (hard to clean)
○ Govt bonds (impossible to find)
○ FD rates (hard to find reliably)
○ Inflation

2. Simulator (python)
○ Start at every possible month
○ Simulate outcome over 30 years For India, the current SWR comes out to be 6.0%
■ Account for inflation and rebalancing
○ Use real historical sequences Ie, 100/6 = 16.7 years of savings
○ Find finishing sums at 30y (or when failed)
○ Calculate probabilities
 How much do I need to save? - ft. India

Observe that all points in the 30y line begin in

the golden decade of Indian stock markets -
1980s.

Or in other words, if you retired in the 1980s,

then your swr was as high as 6%

Is 6% always good enough?

 How much do I need to save? - ft. India

No, 6% isnt always good enough.

Consider the stagnant markets of the 1990s

(1990-97)

Observe how the SWR is a full 3-4% lower than

the golden decade at places
 How much do I need to save? - ft. India
Presently, the trend is towards 3.5-4.5%
(yellow line)

Or in other words, the Trinity study

seemingly holds for India too - with the data
we have so far
Thank you!