5 Essential Prerequisites Before You Think of Retiring Early   Dec 22, 2018



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I met Aniket, a friend of mine, for a cup of coffee. We were meeting after a couple of years, so I asked: ‘Where have you been?’

'Days go by I feel like I am trapped in work. I can’t pursue my passion for photography. Every night before I sleep, I tell myself I will retire early and pursue my passion for photography,’ he responded melancholically.

Aditi, I just want to retire early, that’s all I wish for. But how can I do that?’, he quizzed me.

I told him, ‘It is possible only if you plan well and start early. Start now!

Everyone I meet these days is aspiring for one common thing: To leave full-time work behind and retire sooner – i.e. retire early and rich!

But a blissful retirement costs money. I firmly believe, if you want to retire early and rich, be serious and start retirement planning right away.

Because after you “retire”, you won’t be earning a regular income.

Moreover, your personal life will change; you could pursue your passions, start a new hobby, spend more time with family, and so on.

But ultimately you also need the money so that all the expenses are well taken care of. Unless, you have determined the corpus needed to live a blissful retired life, how will you know if you have the adequate finances to retire early?

To make sure you are prepared for all the changes, follow these essential prerequisites.

  1. Enough savings and investments:

    To begin with, figure out if your savings and investments can produce enough income for you. This should be done taking into cognisance the future costs, i.e. post-retirement expenses (to pursue your hobbies, to travel, household expenses, and among other things your healthcare needs). You need to plan prudently so that you can live your life in a dignified manner once you retire.

    [Read: Will The Retirement Fund Last Till My Last Breath? Know Here...]

    Evaluating the future value, helps you recognise the number of years your funds will last (till you last breath) and if can it counter inflation or not.

    To estimate the amount you need for a blissful retirement, use PersonalFN’s retirement calculator, an online tool that will help you calculate your retirement corpus.
     
  2. Avoid adding debt:

    If you keep adding debt for your short-term gratifications, say a fancy car, swanky gadgets, etc., it can lead to a situation of debt-overhang and have a bearing on the amount of money you will need to save for retirement. Do not give into your impulsive buying habit with plastic money or take loans in haste to fulfil your other financial goals faster.

    Instead, fix an expenditure budget and spend wisely. You will save your hard-earned money, which can be further invested to build your retirement corpus.
     
  3. Kick your vices:

    Try to eliminate your vices of being an impulsive shopper, indulging in unhealthy foods and excessive entertainment, etc. It could prove detrimental to your wealth and health. This could jeopardise your family’s wellbeing too and derail you from your core objective of retiring early.

    Hence ensure that you follow healthy practices.
     
  4. Make sure you are optimally insured:

    Additional stress makes you susceptible to various illnesses. And when you retire, you are aging so the number of physical ailments and emergencies also increase. Hence, it is of extreme importance to be adequately insured.
     
  5. Make sure you have a rainy-day fund:

    Life is unpredictable, sometimes when you think you have figured it out all, life tosses up a situation that you aren’t prepared for at all. This can be unnerving emotionally and drain you financially.

    Hence, you must always be prepared financially. You can do this by having a contingency fund for any unforeseen situation life offers. Ideally, a contingency or a rainy-day fund should last for 6-24 months for all your regular monthly expenses including EMIs. It is held in a savings bank account and/or liquid funds and should be left untouched.

    [Read: Have You Built A Rainy-Day Fund Wisely?]

To retire early, one should plan well in advance. There is no specific age to start planning for your retirement. But in my view, the sooner you start investing for your retirement, the larger your wealth grows. The early start will empower you to accumulate a desirable retirement corpus through the power of compounding.

If you think you are late, you can start right away. As, "it's better late than never".

Thus, if you want to retire blissfully, work meticulously towards achieving it. Take the first step – financial goal setting.

As Tony Robbins states – “Setting goals is the first step in turning the invisible into the visible.” 

Setting a financial goal is imperative because it will serve as a roadmap to accomplish the envisioned end goal — retire rich early. Besides adding meaning and purpose to your life, it ensures that you always stay focused and this is the essential key to effective planning.

And, a comprehensive drawn financial plan must be put to execution, if you wish to enjoy a wealthy and healthy retired life.

As per your financial plan, decide which investment assets or a combination of assets can help you in achieving your end goal faster cautiously. Choose the right asset mix to build a balanced portfolio so as to diversify your risk associated with different asset classes, i.e. equity, debt, and gold.

Ensure that you chose the right investment strategy based on personalised asset allocation depending on your risk profile while investing. Investing for future is to not be aped because your risk appetite and risk tolerance levels differ from someone else.

Every penny you save try and add it to your retirement goal fund. If possible, make sure that you are increasing your contributions every year.

Remember every rupee counts, and the apt way to put it is ‘A penny saved is a penny earned’ – Benjamin Franklin.

If you will stick to your financial plan ardently, nothing can prevent you from reaching your ultimate goal of a wealthy peaceful retirement. Keep a track of it closely and monitor it twice in a year to ensure that you are meeting your objectives.

But remember to be adaptable and modify your financial plan if required as per sudden changes in income, other life goals, and retirement age. If you aren’t adept at doing it all by yourself, you can seek professional help. Reach out to a Financial Guardian in your vicinity who renders ethical, unbiased advice, and handles your money with enough care and prudence as much as they would manage their own.

[ReadAre You Avoiding Meeting A Financial Planner? You Are Making A Grave Mistake!]

Before parting ways, Aniket was elated to know about how early retirement planning can be done. He will now get in touch with PersonalFN's Financial Guardian service to get his retirement plan so that he can retire early.

[Read: Want To Retire Rich And Travel The World? Read This!]

If you too want to retire rich early and need financial guidance you can reach out to PersonalFN's Financial Guardian on 022-61361200 or write to info@personalfn.com. You may also fill in this form and our experienced financial planners will reach out to you.

PersonalFN is a SEBI registered investment adviser. We will be happy to help you.

Happy Planning!

Author: Aditi Murkute



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