Early retirement is a raging global trend. An increasing number of Indians are also exploring the idea of escaping from the rat race as early in life as possible. Starting a business, travelling, pursuing a passion, and spending more time with family are some of the most common things people would like to do after retiring early.
While early retirement is a possibility for a lot of people, it needs plenty of planning and smart decision-making to ensure financial stability even after you stop working in your 40s or 50s. If you are contemplating early retirement, here are 4 points that could help you make the right decision-
1. Have You Accumulated Enough?
Life expectancy has been rising consistently. If you’d like to retire in your 40s or 50s, you will have a long life ahead of you with no consistent source of income. So, the amount you’ll accumulate by the time you retire should be enough to last your entire lifetime.
You should also consider the financial needs of your family before reaching a conclusion. A smarter alternative would be to look for post-retirement income sources. It could be freelancing as a consultant or investing in a retirement plan to receive regular pensions after retirement.
2. What Stage of Life Are You at?
The life circumstances vary between people. Someone in their 40s or 50s might have children who have already completed higher education and are even married. But for many others, their children might not have achieved these milestones.
Closely analyze what stage of life you are at as this will provide a better understanding of the future expenses. Needless to say, events like higher education and marriage are expensive and will require a much larger retirement corpus if you want to retire early.
3. Is the Financial Future of Your Family Secure?
While the biggest impact of retirement will be on you, it is also essential to analyze how it will affect other family members. This is especially true if you have multiple dependents. The most significant cause of concern is the financial security of your family.
Provide a layer of financial security to your loved ones by investing in a life insurance plan. There are now many different types of insurance plans that could help you offer financial safety to your family and also generate handsome returns on your investment.
4. Do You Have Existing Loans?
It is never wise to retire when you are repaying a loan. With no regular source of income, the monthly EMIs could put a huge dent in your retirement corpus. If you have zero liabilities, you can be more confident about retiring early.
If you are currently repaying a loan like car loan, home loan, or personal loan, it’d be better if you think about retirement only after closing the loan.
Is Early Retirement for You?
While the idea of retiring early and indulging in things you love is enticing, it is a herculean task and requires a lot of planning, discipline, and intelligent decision-making. Ask yourself the questions listed above to get a better understanding of your preparedness to retire early.
Note that even if you cannot retire by the age you wish to, you can at least considerably reduce the number of years you need to keep working. Before making any decision, do consult a financial advisor as their professional guidance can help you make the right choice.