The viral ‘10x formula’ for financial freedom could be biggest money trap; experts weigh in

A growing number of Indians are falling for what experts call a dangerous financial myth: the idea that building a corpus equal to just 10 times one’s annual expenses is enough to achieve financial freedom. While the formula is being widely promoted through Instagram reels and YouTube videos, financial planners are warning that it could be the fastest route to going broke.

The alluring formula

The so-called recipe is simple and seductive. If you spend ₹2 lakh per month, or ₹24 lakh a year, you supposedly need only ₹2.4 crore saved — exactly 10 times your annual expenses. Park that money in a flexi-cap mutual fund promising 15% annual returns, set up a systematic withdrawal plan (SWP) of ₹2 lakh per month, and retire in your 30s or 40s.

The idea, on paper, seems to guarantee a lifelong flow of money without work. But as chartered accountant Nitin Kaushik points out, real life doesn’t match the Instagram fantasy.

Why did it spread so easily

The formula taps into psychological triggers:

10x looks achievable, unlike massive retirement goals.

15% returns sound realistic, especially when markets are booming.

SWPs mimic salaries, making the plan feel like a safe paycheck replacement.

“It’s designed to appeal to emotions, not mathematics,” Kaushik said.

Where the math fails

The first problem is the withdrawal rate. Globally, the safe benchmark is withdrawing around 4% of one’s portfolio annually. With a ₹2.4 crore corpus, that amounts to roughly ₹80,000 per month — far short of the ₹2 lakh the formula promises. “At that level, you’re not living off returns; you’re eroding capital,” Kaushik noted.

Second, the assumption of 15% annual returns is unrealistic. While some mutual funds report such growth in certain periods, long-term averages are closer to 10–12%. A market crash or poor returns in the early years — known as sequence risk — can permanently damage the plan.

The overlooked risks

Inflation is another silent killer. At just 6% inflation, expenses of ₹2 lakh today will double to ₹4 lakh in 12 years, but the corpus won’t double in tandem. Add to this the impact of capital gains tax on every SWP withdrawal, and the promised “income” shrinks further.

At a 10% annual withdrawal rate, experts estimate that a ₹2.4 crore portfolio could be exhausted in just 10–12 years. For someone retiring at 40, that means running out of money by 50 — with little chance of rebuilding wealth or career momentum.

A smarter path

Instead of 10x, Kaushik advises targeting 25–30 times annual expenses, withdrawing no more than 4–5% a year. He stresses diversification across debt, equity, gold, and real estate, while also factoring in both taxes and inflation.

“Financial freedom doesn’t mean quitting work as early as possible,” he said. “It means never being forced to work again.”

What should you note?

The 10x formula may look like a shortcut to independence, but experts warn it is closer to a financial time bomb. The real path to freedom requires discipline, realistic assumptions, and careful planning. As Kaushik puts it: “Truth hurts, but it saves.”