Retiring early is many peoples’ dream. Early retirement doesn’t mean like retire at 60 when you just can’t work or find it difficult to work. Early retirement means voluntary retirement. It means to retire from earning money and pursue the life of your passion and dream.
“Retirement is supposed to be the great escape from the stresses inherent in most jobs, a time to experience a fulfilling life derived from many enjoyable and rewarding activities.” Ernie J. Zelinski, The Joy of Not Working
With the high salary levels on one side and booming start-ups which can be sold for a huge amount, early retirement is a reality. People do not want to spend their lifetime just to earn money and retire unhealthy to die.
Millennial, unlike their previous generation, wants to live their life.
“There’s got to be more to life than fighting for fishheads.” Jonathan Livingston Seagull
Things to plan and decide for your early retirement:
1) Think about the lifestyle you want to live
This is an important decision when you have to live on your investment income. This will help you to arrive at the corpus amount you need on hand before you retire.
Minimalist lifestyle will enable your earlier retirement whereas corpus for a luxurious lifestyle may take more years.
This decision is critical. If you are married this decision has to be taken jointly with your spouse.
2) Create a retirement budget
Once you decide about the lifestyle you wish to pursue, you need to decide about the retirement corpus you need to generate.
You need to understand the return various investment options offer. This return has to be adjusted to the inflation. Since early retirement wants you to plan for long-term monetary requirements, an inflation-adjusted return is important to work out.
You also need to know the risk of investing in various instruments. Based on this you can decide the corpus amount.
This is all about financial planning. You need to be savvy about the financial planning. You shouldn’t go wrong here. You may also take the help of a financial planner.
3) Assess your present income
Asses you present income. Project your future income and expenses. This will help you to arrive at the savings you need to for the future corpus.
Your savings rate will have an influence on your retirement plan. The more you can save the quicker you can achieve your budgeted corpus. If both the spouses are working, this can be achieved faster.
This assessment may need you to adjust your lifestyle now. You may choose to save more and cut your unwanted expenses. There may be a situation where one spouse may start working to achieve the target quicker.
4) Analyse and redeploy your present investments
After analysing the present income this aspect is vital. Knowing all about your present investments will make you aware about the redeployment you may need to do, if any, to align with your retirement plan.
Some investments are for long-term and other are for the short-term. Some are not earning a good return, and some are dead investments. Some investments are risky and some are safer.
Redeploy your investments to help you achieve the final corpus not only steadily but safely also.
There are a few investments which offer passive income. These are rent on real estate, dividend on shares, fixed return on mutual funds schemes etc.
Avoid risky investments as this can damage your corpus and future plan. Invest in investments which are less risky and offers a reasonable return.
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5) Secure the future commitments
This is another critical consideration. Cover for all your future commitments. It could be your child’s education, marriage, contingencies like death, and health issues of any of the spouse.
Plan and invest in schemes which offer corpus to manage this commitment and contingencies.
Allocate for this contingencies before you allocate funds for your regular income.
6) Plan out the roadmap & execute:
Now you know the present status of your finance and future requirements. Plan out the income and investment required in the future to meet your financial goal.
Maintain the discipline to reach your goal.
There may be instances you may miss the target to address your present pressing needs. You can’t plan everything. Don’t worry, live in the present with whatever needs to be done. Then as soon as you can again walk the path of your plan.
The goal is to live happily in the present and live happily in the future.
Now you have your early retirement action plan ready. What next?
One more thing you need to do, while you do all your financial planning, is to decide what would you do post-retirement?
- Would like to start an NGO to help the society?
- Would you like to pursue your hobbies like writing/travelling or learning music?
- Would you like to live in the village and do farming?
- Would you like to help others to retire rarely?
- Would you like to pursue your spiritual goal?
There are plenty of things you can do once you retire and are physically fit. It is an opportunity. Once in a lifetime opportunity.
“Retirement, a time to do what you want to do, when you want to do it, where you want to do it, and, how you want to do it.” Catherine Pulsifer
Early retirement gives you this freedom probably for many more years. Your time starts now.