How To Effectively Plan For An Early Retirement?

Retirement is something most of us would definitely choose if we’re given the choice right now. How amazing it would be to put your legs up, relax and have all the time in the world to do the things you otherwise would have not been able to in a regular work schedule. Early retirement is a unique pleasure in life. For some, reasons like health also play a role to cut short a person’s work life. After a certain age, the health of a person starts to decline so they opt for retirement. Now-a-days, this trend is changing. People as young as 40 are also looking to retire early.

This gives rise to the question: how can early retirees afford their standard of living? One must realise that the concept of retirement has changed over the years. People who retire before the age of 60 generally have a second source of income from a hobby, part-time work or a freelance job. Leaving a 9-5 job that gives you enough cushion for a luxurious life shouldn’t be done in a hurry. We give you 4 main things one must do before thinking of retiring early.

1. Adjust for inflation

Retiring early not only means securing your future but also making sure you are prepared for the impending inflation rates. The value of a hundred rupees today is not going to be the same 10 years down the line. Over that last ten years, inflation has been up by 7%. When calculating to save up for retirement, remember to add up to 10% more than how much you are currently saving. An online calculator will give you an estimate. Experts estimate that if you’re in your early 20s, your monthly contribution towards retirement savings has to be as low as 5000 rupees. As one grows older, we need to start saving more.

2. Invest early

Apart from setting aside a dedicated sum every month, make sure you start investing as and when you have the chance to do so. There are many traditional and modern investment options available today. Before you invest, you have to keep a few things in mind. For example, if you are 35 years old, you need to plan for at least 10 years. Keep a note of the level of risk you would like to take. It may be a moderate or high-level risk too. These give good returns as the days pass by. If you are against market-associated risks, you may want to invest in fixed deposits or term based insurance plans. If you would like to opt for risk-based investments in too, you can look into mutual funds. Mutual funds offer a variety of investment options with respect to your financial strategy. Whatever your financial goal, choose to invest for long term stability once you retire early.

3. Clear your debt

Since retirement means no steady income, try your level best to clear off your debts as it might be difficult to pay back later on. The quicker you pay off your debts, the lesser your burden will be later on.

4. Save save save

Inculcate the habit of saving right from today as it will give you the necessary financial freedom and stability later on. One would typically spend 80-85% of the monthly salary and save only the rest. However, once you decide to retire early, you need to take a look at your numbers again. Financial gurus and experts recommend going for a 70:30 approach on a monthly basis. As you grow older, start increasing the value of the saved amount.

Early retirement planning can be beneficial to you in more than one way:

• It could be the best option for your health.
• You are free to do the things you love.
• You can take up new hobbies, at your own pace.
• You can enjoy more time to travel and explore.
• You can be the boss of your own schedule and lifestyle.

Although early retirement sounds great, there are some setbacks you need to keep in mind and see to that you avoid those in your early retirement planning. They are as follows:

• Old age healthcare costs that is covered by the employer stops once you retire. So be prepared for it and take the necessary action.
• The expenses of your children will only increase with age.
• Uncertainty in terms of health and even financial situations like a stock market crash could affect your life and lifestyle once you retire early.
• As mentioned earlier, unpredictable inflation is a key factor to look out for even though you may be prepared for it.

We hope this throws some light on how you should plan to be financially stable, the benefits and some unpredictable things if you’re opting for an early retirement. This will give you an overall picture to plan for an early retirement. If you are someone looking for the best retirement community with the best facilities, do note us down in your early retirement planning. We are The Chennai Homes, a retirement community that is a class apart. We welcome people to become our residents right from the age of 45! The best part about us is that we offer all our guests a trial stay so that they can get a feel of what it would be like to live here. Trusted by a long list of residents, we take pride in the fact that we are one of the best retirement communities in Chennai and probably the only place offering residence for early retirees. Do include us in your early retirement planning and call us anytime at +91 9176677770 and our staff will be more than happy to answer all your queries.