Retirement might not be about your age anymore. In India, the usual retirement age was between 55-60 years. However, the youth prefer to retire early at 40-50 years. While retiring at a young age can help you to achieve your unfulfilled goals, you should not delay the retirement planning. A well-planned retirement can allow you to build a secure future even if you plan to retire soon.
As a working professional, your primary objective can be to accumulate adequate funds for your future. Usually, the adequacy of your funds can depend on the number of assets you own. During your active working years, you might strive hard to earn more every passing day. Therefore, you should know how much you plan to save by the time you turn 40.
When you are 40, you might have a real estate property and a tax-saving investment instrument like Provident Fund (PF). However, having these two investments might not be enough to secure your retirement period financially. You should calculate the amount of savings and investments you need to live comfortably after retirement. Your retirement plan should be a balance between your hard-earned money as well as high-return investment instruments.
In your 40s, your career can be at its peak. Since your career might have progressed during your middle-age, you might be earning enough to pay your liabilities, rental bills, household expenses, and so forth. However, since clearing the debts or EMIs might use half of your income, you should generate a retirement corpus separately. If your accumulated wealth can allow you to replace your earnings, you can be financially prepared to retire early. In that case, you would not only be able to guard your lifestyle but also spend on extravagant expenses.
As you reach your retirement period, you should bifurcate your wealth into three different categories, which are as follows:
- 30% investment in real estate properties
- 30% investment in the capital market
- 30% investment in income asset
- 10% investment in emergency funds
Many of you might aim for early retirement. However, you might be unaware of how to retire early. Therefore, let’s go through the following tips mentioned below to retire at a young age:
- Invest early
Since retirement can be a long-term commitment, you should invest in a pension plan at a young age. When you invest early, you can be able to build a substantial corpus by the time you retire. Moreover, compounding can play a crucial role at a young age as you have an ample amount of time in your hands. For instance, if you invest Rs. 5,000 every month at 30 years, you can generate a retirement corpus of Rs. 75 lakhs.
- Opt for equities
When you are young, you might not be the sole breadwinner of the family. Since you might have fewer financial responsibilities at a young age, you can afford to bear the market risks. Therefore, you can invest in equities at a young age and gain high returns on your investments based on market performance.
- Select a pension plan
Although savings can be crucial for retirement, you should purchase a pension plan to receive a monthly income after the flow of your professional income stops. While looking for the right pension plan suitable for you, select a credible insurance company, and compare different pension plan options in the market.
In a nutshell, there is no specific time for retirement planning. Whether you retire early or late, early retirement planning can be beneficial due to the time factor in your hand. Planning early can ensure you get to build a stable and secure future after retirement.
