In India, even though the retirement age is 60, many individuals are choosing to retire early, a trend that is becoming increasingly popular, especially among the youth.
Some people begin contemplating retirement as early as the age of 30, often due to reasons such as job-related stress and lack of interest.
However, retiring at such a young age can bring significant financial challenges that require careful planning and preparation.
For example, if a 32-year-old employee plans to retire at 50, they must have sufficient funds to support this decision. Various financial tips are essential in this scenario.
With an 18-year working life, starting at 32, the employee aims to achieve financial independence by age 50. During this period, they can focus on creating wealth.
It is important to note that individuals may live until age 85-90. Thus, even after retiring at 50, one must have enough savings to support a comfortable life for around 40 more years.
Suppose the employee’s current annual expenditure is Rs. 7.5 lakhs. Considering an average inflation rate of 6 percent, the employee would need a substantial retirement corpus of approximately Rs. 6-7 crore to retire at 50. This highlights the urgency of saving and investing for early retirement.
Additionally, it is crucial to develop a financial plan to ensure a 7-8 percent return after retirement by investing in a 60-40 percent equity-debt portfolio.
Other important considerations include:
- Saving for children’s education and marriage.
- Buying a house.
- Unexpected expenses such as sudden requirements or medical expenses.
It’s also essential to account for maintaining house and car expenses. Furthermore, one should plan for the financial security of a younger spouse and potential medical expenses and establish a medical contingency fund.
Early saving and a diverse investment strategy are key to achieving early retirement at 50 with a substantial retirement corpus.