Tuesday, 21 February 2012

Early Retirement in India : Extreme Style

Previously I had published a blog entry about one of my role models Jacob Lund Fisker.  Jacob is the driving force behind Early Retirement Extreme, a philosophy of living in general that espouses the concepts of simple living, aggressive savings, and an overarching desire to become financially independent as quickly as possible.  Jacob's also published a book about his early retirement experience that is a must read, if you can get your hands on it.  Now a lot of the examples that Jacob cites in his book are relevant only in the US, and would sound very out-of-place in India.  So I always looked upon his thoughts as more of a vision and guidance, than as specific steps to follow to reach my own financial independence and subsequent early retirement.  For example, Jacob suggests that instead of using a dryer to dry your laundry, you could "air-dry" your clothes after washing, to save on electricity.  Well guess what! none of us in India can benefit from this wisdom, since we all hang our clothes out to dry in the sun anyways.  There are several other examples like this one, which led me to believe that there isn't really much that we can takeaway here in India from Jacob's lifestyle and early retirement experiment.  However, recently I had some time to review several of his blog posts on Early Retirement Extreme, and here is something thought-provoking that I came up with.

There is a particular post on his website that is very relevant to us here in India.  But before I get into the specifics of the post, here is a little quiz question for you.  Which is the more expensive country to live in?  India or the United States?  Which country has the higher standard of living? India or USA?  Which country has the stronger currency, and where do you expect cost of services and general cost of living to be higher?  India or the US? 

If you answered the US for all of the above, you are no different from me, and a million other folks.  You naturally assume that since the US is the more developed country, and since the standard of living is higher there, the general cost of living (in Rupees to make it a fair comparison) should be much higher in the US.  So basically the salary or income that you get here in India, will never be sufficient to live in the US, right? 

WRONG!!  Here is a very very interesting post from Jacob that walks us through, in great detail, how he manages to live in one of the more expensive places in the US (the San Francisco Bay Area) for only $7000 per year.  That's right, you read it correctly, $7000 PER YEAR ONLY.  Convert that into Rupees assuming $1 = Rs50, and you get Rs3.5L PER YEAR expenses to live in the USA.  Now the San Francisco Bay Area is pretty expensive to live in, and it would qualify the same as living in one of the major metros in India.  In fact, if anything, the cost of living there should be much higher than it is here in any major metro or Tier 1 city.  However, Jacob for over 10 years, was able to live for only $7000 per year, or Rs3.5L per year, which in turn is less than Rs30000 per month. 

Now of course, even Rs30000 is a lot of money for the average Indian to earn per month in India.  However the point here is that it IS possible to significantly reduce your expenses to extremely low levels.  If it can be done in a high consumption economy like the US, then surely it can be done, in a much more aggresive fashion here in India.  This thought is the basis of my goal to save about 85% of my take home salary.  I have stated this goal before, and after re-reading Jacob's post, I am now even more committed to it.  Are you with me?


  1. fantastic article...need more info on early retirement regarding investments,hobbies and way to pass time and keep yourself occupied.

  2. Thanks. I definitely need to put in some thought on what to do after early retirement in terms of hobbies and pass time (though some how I get the feeling that won't be much of a problem) I will follow up with a post regarding my thoughts on investments post-retirement, but for now, all of my energy is going towards figuring out how to retire early!

  3. HI Burntout,

    Enjoy reading your blog. I am an avid follower of this topic across several blogs.Keep them coming. Have you kind of decided on a time frame when you want to get into this...?

    Best regards,

    1. Hi Prashant,

      Thanks for visiting. Time frame is a tough question. I was initially targetting within the next 5 years, but I don't know if that is possible anymore. My two biggest setbacks over the last couple of years have been the Indian stock market, and inflation. The former has not done well, while the latter has been at its worst for a while now. I will re-evaluate my plans, and get back on this blog in a short while.


  4. check out for a realistic early retirement tactics for people with kids. BTW, Jacob is no more retired - he went back to work now. So the sustainability of an extreme early retirement is questionable in the long term.

  5. Hi Jayadeep,

    Thanks for visiting. Yes, Mr MoneyMustache writes a highly energetic blog about his early retirement experience. I do feel though that a lot of what he writes is only relevant to the US economy/environment, and not very suitable in the Indian context. As for Jacob, I am aware that he has gone back to working. Jacob maintains that this was more due to boredom, than a need for money. In any case, like I mentioned, Jacob is only "one" of my role models. There are several reasons and methods on why one would/should strive for early retirement. I think it is definitely do-able in the Indian context, and that is what I intend to explore.


  6. Hi retiring in India with 8-10% inflation, more than 10% medical costs is a nightmare. You need enough cushion in your corpus. A withdrawal rate of only 4% is unsustainable/

    I have a suite of retirement calculators which includes the ERE calculator proposed by Jakob which ignores inflation in my site. I will also have a financial freedom calculator including inflation uploaded today!

    Check it out.

  7. You have done really a good job. I like your post. Thanks for the informative post.
    Best place to live in India after Retirement