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Monday, Dec 09, 2019

Plan well to retire early

Is retiring at 40 your dream? You may want to reconsider your plan not just because of finance but also in terms of what you plan to do in your retired years.

business Updated: Aug 27, 2019 10:34 IST
HT Correspondent
HT Correspondent
Hindustan Times, Mumbai
In an era of high-stress jobs, uncertainty in the job market, many may be considering early retirement.
In an era of high-stress jobs, uncertainty in the job market, many may be considering early retirement.(ILLUSTRATION: Shrikrishna Patkar)

Have you ever dreamt of retiring early? At what age do you want to retire? For the previous generation, the preset age of retirement was 58-62 years. Many assumed that after 60 years of age, it was time to relax. However, in an era of high-stress jobs, uncertainty in the job market and willingness to try your passion, many may be considering early retirement – at the age of 40 years or 50 years. If you are one of those who are considering early retirement, here are three things financial planners suggest for smooth planning.

Have a post-retirement plan

Financial planners, as well as people who have retired early, suggest that even before you start planning your finances for your early retirement, you should have a post-retirement plan in place. “It is not a factor if you have the money or not. You may have all the money in the world, but what will you do after retire. You need to have something to fill up your 24 hours. Reading the news, going for a walk and watching TV will consume only a few hours. You will still have a lot of time left every day,” said Suresh Sadagopan, a Mumbai-based financial planner. What do you plan to do with it? “Most people retire at 60 years of age. Post that, you have 20-30 years to live. Given today’s healthcare situation, most people are active at 60. It is not that when you retire at 50 you can’t enjoy life. Even at 60 years, you are alive and active. Why do you want to pre-pone and make it early? If you are spiritual or social inclined or have a hobby, it may work for you. Don’t retire just because you are stressed out. You can always find a lower stress job,” said Sadagopan.

Know the amount required for retirement

If you have decided to retire early, you will have to build a retirement kitty that will take care of your expenses post retirement. Say you decide to retire at 40 years of age, you will still have at least 40-50 years of life. Hence, you will have to factor in the expenses for that period as well. The amount can go above Rs 5 crore depending on your monthly expenses and inflation. However, when you break it down as part of your monthly savings, it may look more achievable.

Don’t panic in case of correction in your investment

Considering that retirement is a long term goal, major part of your investment will be equity, since it gives you a step up to grow your wealth. However, it also means you are taking higher risks and will be exposed to the volatility in the market. You should not panic due to a short-term volatility and rush to readjust your portfolio. You should rebalance your portfolio only if your financial portfolio requires it – for instance, if you have to move money from debt to equity closer towards to goal. You shouldn’t do it just because you see a drop in your investment amount due to short term impact on equity.

To be able to retire early you need to have a financial plan in place. You may seek the help of a financial planner to build an early retirement kitty. Also, besides money you also need to put in place a post-retirement regime in place.