How to plan for an early retirement

How to plan for an early retirement

Have you been dreaming about early retirement? Are you craving an early escape from the rat race? You are not alone! Many people, whether it’s to pursue a passion, start a business, travel, or just to stop working, search for pension plans in India.

But retirement planning includes more than searching for the right pension plans. It becomes trickier if you are planning to retire early.

With enough work and discipline, you can plan well for your early retirement. Here are the key steps to help you get started.

1. Estimate your retirement expenses

The first crucial step in retirement planning is to estimate your post-retirement expenses, especially if you are retiring early. Estimate how much money you will need as your monthly expenses after your retirement. This includes essential expenses such as food, housing, clothing, transportation, utilities, healthcare, and insurance.

Try to enter retirement debt-free. However, if you still have pending debts after retirement be sure to these payments are included in your retirement corpus.

2. Calculate how much retirement corpus you will need

Once you have calculated your post-retirement expenses, the next step is to calculate how much money you should save. How to do that? There are several approaches you can try. One of the simplest ways is to build a corpus between 25 and 30 times your expected yearly expenses. Or you can try a pension calculator to make things easier.

3. Manage your current budget and expenses

Now that you have decided on the amount you need to save you will need to discipline your current expenses. A study has observed that people who plan to retire early live on 50% (or less) of their income. So they can use the remaining amount to debts and invest in pension plans.

You can discipline your current budget in three ways:

  • Spend less
  • Earn more
  • Do both

Instead of blindly cutting on your expenses, understand where your money goes. List down your regular expenses and decide which is less important and where you can cut back. For this, you can try budgeting apps that make this process a bit easier.

4. Invest in inflation-beating instruments

Based on your risk appetite and savings you can choose pension plans that invest in options that offer inflation-touching returns. Equities are one such investment option that helps you build a sizeable retirement corpus.

You can either invest in equities directly via stocks. Or for better safety and assured returns choose the mutual funds and pension plans that invest in equities and offer diversification.

Apart from this, don’t neglect the fixed-income instruments such as FD to balance your portfolio and the financial risk.

Following these easy steps at the earliest will help you retire risk-free and tension-free.

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