Bangalore resident Rajesh Navaneetham, now 56, worked in the corporate world for 30 years before quitting at age 49. He spent the last 14 years of his corporate life at his Dell. Navaneetham said, “When I turned 45, I started thinking about my purpose in life. It was then that the thought of retiring at 50 struck him. Instead, he wanted to work for a social enterprise that beneficially solves social problems.
However, Navaneetham did not make decisions on a whim. He’s part of a growing tribe of individuals who have their boots hanging early only after creating the right corpus and making the right financial plans. I consulted with an advisor and made a life plan to achieve my goals.
“My financial advisor calculated my retirement benefits based on my financial goals so that I could quit my job by the time I turned 50,” says Navaneetham. When he was 45, he had the body, but he wasn’t good enough for early retirement. So he started saving systematically every month. He spent the next four years building the retirement corpus he needed and left the company at age 49. says Navaneetham. He also highlights that during his time at Dell, he became a member of the Indian Angel Network and was introduced to social enterprises. This helped prepare him for what he wanted to pursue after retirement.
In another example, Mumbai resident S Natarajan, 54, has taken early retirement from Tata Motors. Early retirement was sparked in October 2009 after the birth of a son with special needs who would be dependent on him and his spouse for the rest of his life. After his birth, he left the company early and wanted to live a long, stress-free life for his son. To build his retirement corpus, he relied on his knowledge of financial planning. He planned to have his retirement corpus ready by 2023, when he turns 54.
Take into account inflation, cost of living and medical costs
Navaneetham was building a retirement corpus following a template provided by a financial advisor. This took into consideration a variety of factors, including the cost of her daughter’s overseas education, the cost of marriage, maintaining her family’s current lifestyle, and planning annual vacations. His advisor, after consulting with him, identified all these factors to arrive at the retirement corpus.
Natarajan has also followed the Excel template he created since 2002. As with Navaneetham, the plan took into account his cost of living, inflation, medical care, life expectancy estimates, and the age at which the retirement corpus would be exhausted.
“There are other factors that can occur as recurring expenses. It needs to be considered,” said Vishal Dhawan, founder and CEO of Plan Ahead Wealth Advisors.
Steps to derive the required retirement corpus
Natarajan listed all the actual expenses line by line in an Excel template. This includes things like rent, medicine, insurance, monthly groceries, vegetables, utilities, entertainment, and income tax. retirement corpus,” says Dhawan. He adds that preparations should incorporate some buffers, miscellaneous expenses, etc. Then figure out which of these expenses will increase or decrease when you retire.
“A simple rule that you can apply is to multiply your retirement years by your current spending (also consider goals like children’s education, marriage, etc.),” says Scripbox co-founder Anup Bansal.
Also Read: Early 50s and Nearing Retirement? These 2 MC30 Schemes Can Get You There
A systematic investment strategy is the key
Natarajan has systematically built a retirement allowance corpus of Rs 500 crore. In his early years as a company employee, he invested in a mix of debt securities and equity assets. His investment portfolio consisted of Public Provident Fund (PPF), Voluntary Provident Fund (VPF) contributions, several mutual funds his schemes and stocks with an outflow of approximately Rs 50,000 per month . From 2017 onwards, he began to focus on direct stocks, piling up blue chip and mid-cap stocks through his own research. In 2019, he cashed in two of his properties and added this amount to his retirement corpus. After his retirement, he diversified his portfolio to include government bonds, exchange-traded funds, equities, and a cash component (savings account).
“You need to plan your portfolio strategy for pre-retirement and post-retirement stages,” says Dhawan. Executing a conservative strategy in both of these stages may require a larger corpus to cover living expenses in retirement, he adds. Returns may outpace inflation over time. Therefore, less corpora may be required.
For example, if you want to retire at age 50, you need a corpus of Rs 50 million as derived from your actual annual expenses, future goals, and life expectancy between 85 and 90 years old. Then, if you start saving at age 30, the monthly investment required is Rs 33,333, and if you start saving at age 35, the monthly investment required will more than double to Rs 73,750. (see illustration).
“While building your retirement corpus, don’t take unnecessary risks or get swayed by speculative, cryptocurrency, or exotic investments,” says author and financial mentor Rishi Piparaiya. increase. Put your retirement corpus aside and don’t gamble on the stock market after retirement.
Continue your insurance plan
It’s important to keep a regular plan going if you have people who depend on your income. increase. If you have any outstanding loans after early retirement, you will need to continue with term insurance to cover your liabilities.
Adequate separate health insurance for elderly dependents and floater plans including spouse and children is very important, especially for retired people. I have insurance. He keeps a separate health insurance plan of his Rs 20,000 for his elderly mother.
Lifestyle changes after retirement
Lifestyle changes after early retirement are important. “You should not buy his second car or his third car or another house for investment or vacation purposes as there will be no regular income after early retirement,” he said. says Mr.
For example, Natarajan sold his car. He now saves on fuel, car maintenance, and monthly driver expenses. He uses a taxi aggregator service for transportation.
Also read: It’s never too late to save for retirement in your 40s
Advice for those considering early retirement
“Enlist the help of a trusted (financial) advisor to plan for early retirement, which is very important,” Navaneetham says. Spend enough time finding your purpose in life and writing it down on paper.
“Focus on building the skill set for starting multiple streams of income, including passive income in retirement,” says Natarajan. Be progressive and don’t cut spending, he adds. Financial planning is one of his pre-requisites for early retirement. But you also need to have a plan in place to make your wishes come true. Retirement is not a financial decision, but a more ambitious decision. Back it up with strong financial backing to ensure smooth sailing.
Bansal says early retirement has important non-financial aspects that are often overlooked. But I have seen people who suddenly have nothing to do and get depressed. He concludes that it is very important to think about how to make good use of your time after early retirement.
(using information from Maulik Madhu)
