Five Financial Planning Tips That Can Help You Retire Early

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Are you wondering how that neighbour or relative who is still in his 40s has bid adieu to corporate life and is now pursuing the hobbies that he always wanted to? Guess what, you could get there too with the right financial planning! Here are five tips that can help you hang your boots early –

When it comes to retirement in India, the late 50s is usually considered to be the traditional age to retire. But with increasing awareness and smart money management, you’ll see more and more professionals now retiring at an early age. There are now, several different ways to save and invest your money such that it grows to help you become financially independent at an early age, and retire sooner.

But while retiring earlier can be a refreshing thought for most, it is something that requires a lot of planning and discipline. If you want to retire early, we have five great tips to make sure that your second innings goes as well as you dreamt it to be.

  1. Determine the age when you’d like to retire

Even before you start Financial Planning for early retirement, you should know the age at which you’d like to retire, in advance. For instance, if you are in your 30s now, and would like to retire by 45, you need to be sure that you have enough savings to actually retire when you want to. The age at which you’d like to retire is important since it the goal based on which you need to plan your finances. So, start by first arriving at a reasonable age that you’d like to retire.

  1. Learn new skills when you are young

Work is not merely a means to earning money, but is an integral part of what we want to achieve. A lot of professionals who retire from their professional lives do not stop working altogether. They look for less stressful opportunities or things that allow them to have more time for themselves and their families. To ease into this kind of a life, it will be useful to learn new skills when you are young. No matter if you love music or building software or stock market trading, start learning from when you are younger as this will help you remain intellectually satisfied as well as supplement your post-retirement income.

  1. Estimate your monthly expenses

Most people dream of the lifestyle that they want once they retire, but do not assess whether they will be able to afford it. The next important step therefore, is to estimate the monthly expenses you will incur when you retire. While this would be easier for people who track their monthly expenses, people who do not, can start by going through their bank statements and determining total money outflows over a year. Now, subtract the expenses which you will not incur after retirement viz. travel expenses to get to work. Consider additional expenses of a recurring nature, once you retire viz. higher medical bills as you age. Divide this number by 12, and you’ll have an estimate of your monthly expenses after retirement.

  1. Start Saving and Investing

You can now start creating a plan to save and invest your money depending on when you’d like to retire, your estimated monthly expense, and your current age. You will also need to consider how long you will live. Use all of these to create a solid financial plan. Start living as prudently as possible, cutting down spends where possible and invest wisely to enable yourself to retire at the age that you want to.

  1. Building the right portfolio

Depending on the time you have on hand to put this retirement corpus together, you will need to choose your investment vehicles – balancing the returns you seek, and the associated risk. This will only be possible if you have the right mix of investments in the retirement portfolio. The portfolio should take into account the period leading up to your retirement, your target, and your risk appetite. If you want to retire by 45 and are currently in your 30s, you surely need to look for investment options that offer high returns – at least 15% p.a.

While early retirement planning is doable and possible, it is natural to have apprehensions due to the unpredictability of life as well as finances, and a fear of the consequences you may have to face in case you are not adequately provided. If all this sounds too much to manage on your own, look for the right money management experts who can help you create the right plan. Even if you’ve already created a plan, you can still take a second opinion to ensure that you are on track to achieve what you want – retire when you want to.

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