Early retirement is not a pipe dream, for all we know! But let us be a little practical while starting off and say that achieving the same requires discipline, excellent financial planning, and a bit of luck as well. Now what do we mean by early retirement? In this case, it is certainly not feasible (if you don’t have a family business or rich folks to count on) to retire between 35-45 years of age. So most people usually take early retirement to mean anywhere between 45-55, giving them time to comfortably pursue other passions, explore the world, start up on their own, or fulfill any other personal objective.
So how do you quit the 9-5 grind? It is only possible with top-notch retirement planning strategies. Here are some tips that may be helpful.
Retiring Early- How to Make It Possible
There are a plethora of retirement plans in India that you may come across. However, it is important to have a well-thought-out strategy in place for retiring early. Here are some tips worth considering:
Choose Proper Investment Options- Retiring early means missing out on a comfortable salary each month. When you start earning, you will naturally have a limited window to save for early retirement. Suppose you start earning from the age of 25. In this case, if you want to retire at 50, then you only have 25 years left. Hence, do not only look at building your savings but also invest your income to grow it periodically. You should always choose investment options after taking professional advice and those that can successfully beat inflation while giving you good returns over a sustained duration.
You may consider investing in ULIPs (unit-linked insurance plans) to ramp up your retirement corpus. These policies give you life insurance coverage throughout your working years (which takes care of your family’s financial needs in case of your unfortunate demise within the policy period) while investing your money in market-linked instruments. Depending on your goals and risk appetite, you can choose the funds to invest in. The best part is that you can periodically rejig your portfolio and switch funds depending on market conditions and changing needs.
This helps you maximize returns and safeguard your portfolio. ULIPs also give you tax deductions under Section 80C on the premiums that you pay (up to Rs. 1,50,000). You can also diversify your portfolio to choose dedicated retirement plans and pension plans for earning future income every month.
Keep Scaling Up The Investment Amount- Remember that you do not have the luxury of time when it comes to retiring early with a significant corpus in place. Hence, you should keep increasing your investment amounts with every increase in your income.
Be disciplined while resisting luxury purchases and channel your annual increments, bonuses, and other gains into investments and savings plans for the future. You should also keep inflation in mind, and hence you should keep scaling up the investment amount on a yearly basis in order to make provisions for rising living costs.
Take An Active Role In Managing Your Investments- Do not be a spectator or a mute bystander with regard to your investment portfolio. Keep tracking your ULIP returns and NAV periodically. Consult your fund manager and switch funds whenever needed. Track your other investments across SIPs, mutual funds, pension plans, and the like.
Try and maximize tax efficiency across the board by periodically reviewing your portfolio. Keep revamping your investment portfolio since plans chosen a few years back may not hold as much relevance in the current scenario. You need to keep doing your homework in order to actively manage your portfolio for the best results.
Get Adequate Health Insurance Coverage- You should always have sufficient health insurance coverage from the beginning of your professional journey, ramping it up as you grow older. This will be a safety net for you in the future with regard to medical treatments, hospitalization, and other related costs during emergencies.
Ideally, you should invest more in equities when you are in your twenties and can take more risks. This will help you build a corpus that can help you retire early. You should also ensure that your family has a home and that the loan, if any, has been cleared entirely by the time of your retirement.
You can diversify your investments across ULIPs, term insurance (for securing your family’s financial future in case of your unfortunate demise within your working years), health insurance, EPF (employees provident fund), PPF (public provident fund), SIPs, and other mutual fund investments, and retirement/pension plans for earning income after retirement.
Start as early as possible and keep your goals realistic. Then, with some initial sacrifices, discipline, and commitment toward long-term objectives, you can build a corpus that will help you retire early and pursue your other passions in life.