Making an Effective Early Retirement Plan: Some Dos and Donts That Can Take You a Long Way
While 60-65
is still considered as the general retirement age in India, an increasing
number of young professionals are aiming to retire sooner. While this might seem
like a complicated feat, with the right knowledge and investment selection, the
goal is nearer than you'd expect. Check out this post for some very important
dos and don'ts of retirement planning.
We strive
throughout our younger days with a hope to live a financially independent and
peaceful life once we retire. In India, the retirement age is usually around
60-65. However, there is a rising trend among young professionals to retire
sooner and take up something like a hobby which they always wanted to do in
their younger days.
But is it
possible to retire sooner, say around 50 or even before? While this might not
be the easiest task, with the right knowledge and investment advice, you surely
can achieve it. Here are some dos and don'ts of planning an early retirement-
Dos
1. Get your Goals in Order
The first
thing that you should do is to get your goals in order. Try to imagine the type
of life you'd like to live after your retirement. It is only once you know how
much money you'll need after retirement that you can identify an approximate
amount that you'll need.
Once you
know the approximate amount, you can then start working on your saving and
investing strategy.
2. Take Action Now
No matter
even if you are in your 20s, you should start planning for your retirement as
early in life as possible. But this does not mean that you cannot begin even if
you are already in your 30s or 40s. When you are young, it is not possible for
you to save a considerable amount and invest the same on a regular basis.
But the
more important thing here is to begin. Start saving and investing whatever you
can right now.
3. Understand the Different Investment Options
Now that
you are focused on investing, it is also essential to understand the different
investment options. From direct stock investments to mutual funds, there are
several options that you can consider for long-term wealth creation.
Try to
understand how these investments work to pick ones that suit your financial
goals and risk appetite.
Don’ts
1. Never Invest in a Single Investment Vehicle
Direct
stock investments and even equity funds are very popular for their impressive
returns potential. No matter how good you are at picking stocks and funds, you
should never put all of your savings in a single investment vehicle.
Always try
to build a diversified portfolio with elements like stocks, mutual funds,
bonds, etc.
2. Do Not Avoid Inflation
The
inflation monster will continue to reduce the value of money. So, when you are
trying to project your post-retirement life and calculating what you might need
after retirement, do not forget to consider inflation.
Your
purchasing power will fall considerably within 20-30 years, and you'll need a
significantly higher amount to manage a financially independent life after retirement.
3. Do Not Abundantly Compromise Your Present
Life
While it is
good to spend less and save more for your early retirement plan, this should not be done at the cost of
compromising the quality of your current life.
Try to work
out a balance between your current and future life to make sure that none has
to compromise abundantly to make way for the other.
Recipe for Early Retirement: Strategize, Plan,
and Execute
With the
rising income and several investment options in India, early retirement is very
much possible. Be it spending the post-retirement life with your children and
grandchildren, starting a new business, or just enjoying what you love, all of
this is achievable with a solid investment strategy.
Keep the
points mentioned above in mind and put them in action as soon as possible to
create a solid retirement plan.
