The notion of early retirement is becoming increasingly popular amongst India’s younger working population. A large number of young professional workers are now yearning to leave the working world by 40 or 45, influenced by the global FIRE (Financial Independence, Retire Early) movement, and spend the rest of their lives travelling, spending time with family, and doing their hobbies.
Although inflation has decreased in India in recent years, the cost of living (rent, education, and health) has continually been rising dramatically. A moderately comfortable lifestyle today will likely cost almost twice the amount 20 years from today. Additionally, with the financial commitments of taking care of parents, raising children, and paying EMIs, the amount to retire 40+ years from today only increases.
So the question for the young workforce in India, can we afford to retire early or does the math simply not work for most of us?
Why early retirement attracts young Indians
- Changing Values: Young people today prefer flexibility and opportunities to grow as compared to previous generations who liked security in a job. Early retirement means freedom for many young’ to choose how to spend their time without having to rely on making money from work.
- The Power of Social Media: The FIRE movement has found its way into most homes through financial influencers, social media has been portraying people successfully obtaining early retirement anywhere in the world. The western world has been promoting early retirement and balance of life. This creates an impressions for us as well and people get influenced.
- Higher Stress Levels: With daily commutes in metro cities, higher working hours, and blurred boundaries between work and life, burnout has become common for many. For younger workers, retiring early is thought of as the ultimate escape.
- The Growing Dream: Across India’s urban workforce, conversations about financial independence and early retirement are becoming mainstream. The dream is widespread and aspirational—but turning it into reality requires more than motivation. It demands financial math that most struggle to meet.
The math of retiring at 40
Consider you are currently 25 years old, and have a goal of retiring at 40 years old. At present, your family spends around ₹1 lakh a month. Due to inflation, your monthly expenses may rise to ₹2-2.4 lakh per month when you reach 40 years of age. This is almost ₹25-30 lakh a year.
If you retire at 40, you may live for another 40 years or more: This implies you want to ensure your portfolio can pay for increasing annual expenses over four decades, nurturing the idea that you will have more or less zero earned income in those four decades.
The “safe withdrawal rule” comes into play here. Around 4-5% of the retirement corpus is the amount that financials planners generally suggest that you withdraw each year. Your portfolio would not only keep pace with inflation, it would enjoy compounded growth for what you take out. Simply put, if you are spending ₹25-30 lakh a year, but can only withdraw 4-5% at a safe withdrawal rate, your target corpus total comes out to somewhere around ₹7-8 crore. Again, this is not even adding luxuries, just simply maintaining today’s lifestyle for the rest of your life.
A shock in healthcare, bumping your lifestyle, or family costs you did not plan on can push this amount much higher.
Finally, think of how you would get to the corpus. Starting at 25 years old investing approximately ₹1.5-2 lakh a month at a 12% return would get you to ₹7-8 crore at 40 years of age. To achieve this level of savings is nearly impossible for the average young professional, balancing EMIs, rent and family obligations. Retirement at the age of 40, while aspirational is financially beyond reach for most.
Smarter alternatives to consider
Though retiring at 40 may sound appealing, for the majority of people, it will not be a feasible financial option. Instead of attempting to pursue an extreme version of the dream, here are some smarter and more realistic options that can still be rewarding and fruitful:
#1. Mini-Retirements
Instead of holding a nine-to-forever flight into the sunset, you can take shorter sabbaticals, or career breaks, every few years. You might take six months or a year off to travel, study, or work on personal projects. This way, you get a break without seriously risking your financial viability.
#2. Coast FIRE
“Coast FIRE” means aggressively saving in your 20s and 30s, and then coasting; you have built a sufficient portfolio and “let compounding do the heavy lifting.” Then if you decide to switch to a lower-stress or passion job, you can without the need to worry too much about retirement savings.
#3. Flexible Retirement
Instead of a hard stop at age 40, work towards retiring in your 50s and maybe as early as 55 with multiple income streams in place. Income streams can be rental income, dividends, pensions, or consulting work. You will have reduced pressure in accumulating an oversized corpus, but you will still be able to step away from a stressful full time job sooner than normal.
#4. Hybrid Plans
Explore standard retirement planning, mixed with lifestyle adjustments. Scale back on luxurious expenses today, take a job, move to less expensive city in a few years, or take a part time job with interest or enjoyment. Small adjustments an help you find the tipping point between financial viability and lifestyle freedom.
#5.Career Rebalancing
Instead of hopefully sprinting toward an exit plan for work, view your career choice as more of a marathon; and, after your 30s, consider intentionally moving to work life that is less stressful and less rewarding work, but still increases work-life balance. A slower pace can generate the same sense of freedom as retiring early.
#6. Side Hustle Security
Creating side incomes – whether it be freelancing, online businesses, or creative, and all too often equal learning – provides flexibility. Side-hustle incomes can gradually build or become additional streams of cash flow that lowers dependency of your day job and contributes to a semi-retired lifestyle down the road.
#7. Geo-Arbitrage
Many professionals are looking at their options to move to a small town or an inexpensive country with a lower cost of living. Depending on how you reduce your expenses but still maintain your lifestyle quality, your savings could reduce expense in a semi-retired lifestyle much sooner.
#8. Health-First Retirement
In some cases, your desire to retire early comes from burnout, not finances. Working to prioritise your health, fitness, and mental wellness while continuing to work can often provide you the same experience as a “true” retirement, without the stress of unrealistic financial achievements.
While the notion of retiring at age 40 is thrilling, the reality of achieving that goal financially is much more complicated! With rising expenses, increasingly long retirements, and the absolute need to save, this will be extremely difficult and it will generate far more stress than freedom, if it can be achieved at all.
Start thinking of being financially independent and developing new skills. By maintaining your savings and investing it, you can find ways of enjoying a balanced life.