Are you bored with the regular 9 to 5 life and want to retire early to live the life of your dreams? Do you think you’re giving up on your dreams to fulfil your company’s dream? Do you think you could do more with your life if you were in a secure position? Do you also feel that you’re not taking enough risk?
There’s also no one answer to all these questions but the one thing that can bring you closer to the answer is early retirement. Retirement is looked upon as an idea that means slowing down after a lifetime spent working. The average Indian age for retirement is at 60. However this is not true for everyone, some have decided not to wait till their 60s to plan.
Retirement in your 30s means attaining financial freedom early on in life. This will help you to live a life without worrying about money related problems. To retire in your 30s, you need to answer only 3 questions and you’ll be sorted for your old and gold days:
- How much money do you require to retire early?
- How can you get that amount of money ?
- How can you make sure this plan is foolproof ?
Let us dive deep into the first questions so that we can figure out how much money do we really require to save in order to attain financial freedom. As per William Bengen who proposed “The 4% Rule” under the FIRE i.e., Financial Independence Retire Early strategy that says you need to save 25 times of your yearly expenses. For convenience, let us assume that you need Rs 50000 every month to survive until you die. This means you need Rs. 600000 per year. Now multiply this number with 25 which is equal to Rs1.5 crore. This figure is the lump sum amount you need in hand to retire with. Here we assume every year your portfolio will grow at a minimum rate of 4% giving you 600000 return in hand which can be used up for that year’s expense and our portfolio remains invested further.
Diving into the second question, we can get this money by saving up from our salary and investing the money further into high return instruments. There are a lot of saving Instruments available in the market like PPF and Fixed deposits. However, in order to achieve high returns, we need to invest our money into high risk-high return avenues like the stock market, real estate and other alternative investments that will help to multiply our money faster. These come with attached risks hence maintaining higher caution is advised.
But having a number and plan isn’t enough, we must make it foolproof so that you can retire and lead a life that you planned. One must make sure that their investments are growing faster than the rate of inflation. Here we change the 4% rule to 8% rule (because we want to earn more than the inflation rate), where you have to save 12.5 times of your yearly income. As per our previous example, we will need to save Rs. 75 Lacs in lump sum now. This needs to be invested in products that provide higher return. We recommend you to begin investing early as compound interest provides much higher returns over longer time horizons. The earlier one understands the benefits of investing early, it helps to reach financial goals faster.
To retire early and lead a life fulfilling your and your family’s little dreams, we all need a plan. We’re not saying it’s easy but you’ve got to try out what works for you. We don’t want you to lead your old age with a regret of not saving enough. PensionBox aims to be your partner of your old age so that you live golden days in prosperity. We urge you to sign up today and plan your old age with us.