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How to retire at 40: Hate 9-5 job? Prepare for early retirement with these tips

Early retirement planning tips: Most of the people are not happy with routine 9-5 jobs these days. Be it a single man or single woman, or a family person, regular jobs are not something they want to be engaged in till the age of retirement.

How to retire at 40: Hate 9-5 job? Prepare for early retirement with these tips
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Early retirement planning tips: Most of the people are not happy with routine 9-5 jobs these days. Be it a single man or single woman, or a family person, regular jobs are not something they want to be engaged in till the age of retirement. It won’t be wrong to say that a significant percentage of the employees working in the private sector want to retire early so that they pursue their individual interests. But, they are confused about how to plan for early retirement. The biggest hurdle that comes in the way of early retirement planning is money. However, with a little planning and following a financial discipline, one can realise the dream of retiring early.

For those looking to attain financial independence and early retirement, Harsh Jain, Co-founder and COO, Groww has shared following tips to follow to ensure they are headed in the right direction:

Start Early

The first thing to do for building the desired corpus is to start as early as possible. Starting early works in your favour for many reasons – it gives you the flexibility to stomach risks by investing in high-risk high reward avenues that accelerate wealth creation.

If you start investing around the age of 24-25 for your retirement, by the time you are 35 and still not overburdened with other financial obligations, you would have accumulated quite a lot. Needless to say, the earlier you start the more you would be able to accumulate, the better are your chances of reaching your retirement corpus earlier.

Make the right investment

Since long term wealth creation is your objective, it makes sense to invest in investment instruments that offer you inflation-beating returns. Mutual funds in this aspect will definitely come to your aid.

Suppose you are 25 years of age now and want to retire by the time you are 40. In this case, your ideal portfolio will be a mix of equity and debt with more exposure to equity. So for the first few years say 10 years your portfolio can be 80% equity and 20% debt and as you near the retirement corpus or the retirement age, you can reverse the percentage to rebalance your portfolio. This will ensure your risk is minimized by the time you choose to redeem your funds after reaching the desired retirement corpus.

To begin with, choose a diversified equity portfolio ( 1 top-performing small-cap, mid-cap and multi-cap fund each) and expose about 20% of your portfolio to debt funds as well.

Liquid funds will not only stabilize your portfolio in times of market volatility but also build a corpus for short term requirements. Liquid funds can also act as an emergency fund that you can use during times of financial emergencies. This will make sure your long term goal is not compromised. It is a plus if you have already invested in long term investment schemes like PPF and FD and other tax saver schemes as these will aid you to reach your retirement corpus.

Automate your investments through SIP

Like any other goal, building your retirement fund requires dedicated effort. The best way to make sure you are diligently working towards this goal is to automate your investing via SIP. SIP will make sure you never forget to invest which may not be the case with lump sum investments as you would have to consciously remember. Investing in equity funds via SIP mode also frees you from the hassles of timing the market. Starting early via the SIP route will be light on your pocket; the compounding effect of small sums over a long period will help you beat inflation by a substantial margin.

Increase the investment amount with an increase in income

As your income increases, you can proportionally top up the amount towards your retirement fund. You can also utilize yearly bonuses and increments to boost investments towards your retirement to reach the goal faster.

Buy a Health Insurance with adequate cover

By health insurance with adequate cover to meet the rising costs of medical expenses. Get insurance as early as possible as the premiums get costlier with age. Good health insurance will ensure you don’t have to dip into your retirement corpus to fund medical contingencies.

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First published on: 09-03-2020 at 16:53 IST