Do we really need 40 crore for our retirement?

Recently in a podcast someone mentioned that we should have 40 crore for our retirement.

It made me think — who decides these numbers? Who decides these so-called "FIRE" numbers?

I realised that most of these come from people with hidden incentives.

Imagine that I have a shop where I sell water bottles. Now if you ask me how many water bottles should one have, what do you think I would say? Assuming that I'm a very unethical guy, I'll probably say the highest number possible. I'll say you need one bottle when you wake up, one different kind of bottle for your yoga class, one professional bottle for your office, one handy bottle for your gym class, and one temp-controlled bottle for the night. My incentive here would be to sell you as many bottles as possible.

Similarly for investments. The moment you realise that X amount of money is enough for you — that very moment you will stop saving and investing, and this will directly hurt the incentives of almost all players in the investment industry. Which is why we see absurd numbers floating around about how much you need for retirement.

No one else can decide whether you will need 40 crore or 4 crore. For someone else's incentives you might need 40 crore in your retirement, but the only person's incentives that matter in the world are yours. You need to sit down, figure out what kind of life you want out of retirement, and according to those expenses arrive at a number you'll actually need.

I want to spend time with my friends and family in my retirement and stay fit enough to play cricket every day. That is what I want out of my retirement. I don't wish to go on a world tour. I don't wish to buy a Lamborghini. Clearly my number for retirement will be very different from someone who wants all of those things.

The idea is not to avoid retirement planning altogether — but while you're at it, make sure that the incentives you are accounting for are truly yours and not someone else's. Any third person can come in and scare you about a thousand things that can happen in your retirement. What if this happens… what if that happens… what about this, what about that — and you get so scared that you end up saving most of the money you earn for a future you haven't even imagined clearly.

You avoid the trip to Japan because you want to have 40 crore for retirement. You avoid your child's first bicycle because you want to have 40 crore for retirement and pass on inheritance. You avoid going to your friend's bachelor trip because you want to save money.

Now you are 60 and you have 40 crore — but guess what. You can't go to Japan because you have a slipped disc and arthritis. Your child will receive 20 crore of inheritance, but he hates you because you did not spend enough time with him in his childhood. And your friend managed to keep his marriage alive and never had a bachelor trip again that you could attend.

I hope you get the point. A financial adviser can help you plan according to your incentives, but he is no one to tell you what your incentives should be — and he should not even attempt to do so. The only person who can figure out your incentives is you.