Dreams of leaving work at 50 and having a stress-free retirement are enticing no more office politics, rigid schedules, or Monday blues. The unfortunate reality is that behind the dream is money, money, and more money. Without a plan put into place, disciplined saving, and good investments, early retirement will remain an unreachable dream.
Chances are, if you are past your thirties, you have got the fantasy of early retirement anytime after a hard day in the office or the thought of someone going financially down after retirement. Most people, however, get to work until age sixty, either because of unavailability of funds or bad planning or lack of savings.
But what if you could break free early? Let’s dive into some ways to plan for it.
The Math Behind Early Retirement
Imagine you’re 32 years old and want to retire at 50. That gives you 18 years to save, invest, and build a retirement fund.
Now, consider life expectancy. With medical advancements, living till 85-90 is becoming common. If you retire at 50, you’ll need enough money to sustain yourself for 40+ years without a paycheck.
How Much Do You Really Need?
Let’s break it down:
- Current annual expenses: ₹7.5 lakh
- Inflation rate: 6%
- Expected post-retirement returns: 7-8%
- Investment mix: 60% equity, 40% debt
Under these assumptions, you’d need a retirement corpus of ₹6-7 crore to comfortably last till 90.
But is just saving this amount enough?
The Hidden Challenges for Early Retirement
Life Does Not Stop at Retirement
Retirement is not the only financial goal you might ever have. Other expenses are:
- Destination for children’s education & marriage
- Buying a home
- Unexpected emergencies
- Each of these require a separate fund, so do not be too sure that your retirement fund will take care of all of them.
Do Not Overrate Investment Returns
Being very optimistic about the returns may sometimes work against you; the longer your retirement, the more cautious you should be about taking any risk-Market downturns early in the retirement period can deplete savings very fast.
Health-Making Emergencies Could Be Savings Detractors
Medical costs skyrocket as you grow older. So, doctors and hospitals allowable–and disallowed–costs go into an emergency health fund you set up yourself since your insurance won’t cover everything.
Unanticipated Large Expenses
Car breaks down. Time for home renovations. A bigger, more important family emergency hits. Keep some cash tucked away.
Biggest Risk? Running out of money.
If you didn’t plan properly and retired with an insufficient amount of money, it is pretty much going to be very hard for you to return back to a job. So, do require very effective planning-Enjoy an expert financial adviser locally if you are unsure.