Retirement is an integral part of the working life. After working for many years and fulfilling your commitments and responsibilities, you may want to enjoy a peaceful post-retirement life. It is an innate desire for all working professionals. Over the years, the retirement trend has undergone a significant change. Today, many people, especially the millennials aspire early retirement after just 20 years of work.
If you too harbour such dreams, it is vital that you start planning for your retirement as soon as you get your first pay cheque. The key to a successful and happy retirement is to have enough funds to be financially independent even when you don’t have a steady income from employment. Also, many people nowadays plan to retire early so that you they have plenty of time to indulge in activities that they always wanted to do like starting their own business, building a home, etc.
As mentioned, the key to happy retirement is meticulous financial planning. Here are a few vital tips that can help you.
Follow the FIRE principle
The key to a happy retirement life is to have a significant saving and investment to help you take care of all your financial needs, including hospital expenses post-retirement. And, to the build the corpus, following the FIRE (Financial Independence Retire Early) principal can immensely help you.
Generally, experts suggest saving at least 30% of the income towards for retirement. However, the advocates of FIRE principal suggest spending 30% of the income while saving and investing the rest in various investment schemes. The FIRE principle emphasises on simple living, with small homes, driving economic cars and making sure that you don’t pile up any debts that may extend till retirement.
Be ready to the hard yards
While the idea of retiring early after just doing 20 years of work may seem a lucrative option, however, it is vital that accomplishing such a life may be challenging. It would require you to be committed to your savings for the future. If you want to retire comfortably and be financially independent, you need to build a significant corpus that will last for at least 30 years after retirement.
This means you would have to invest at least 70% of your income towards retirement savings plans. You may not be able to invest in any luxury items during your working years. If you must buy something new, it would be only to replace the old ones that are not working or are broken beyond repair.
If you are willing to ready do the hard yards initially, it can help you live the retirement life that you always envisioned for yourself.
Choose the right investment instrument
The success of retirement planning India greatly depends on the investment instruments investments you choose. Remember, your objective is early retirement, which means you would need a significant corpus that could last for years. Hence it is vital that you start investing from an early age; it is better to invest in retirement plans as soon as you get your first pay cheque.
You can consider investing long-term plans like NPS or National Pension System. It invests the funds in various marked-linked assets like government bonds, debt funds, equity funds, etc., based on your risk appetite and financial goal to generate inflation-adjusted returns.
You may also invest in other high-risk options like stocks, which also has the potential to give you significant rewards. But generally, investment experts advise investing in a small amount in different schemes so that you have a balanced portfolio.
Early retirement is not just a dream anymore, it can be your reality too. However, to have an enriching retirement experience, you must plan your finances well and invest in the right schemes.