If working till your 60s is something you aren’t looking forward to, an early retirement might be your way out. However, retiring early sounds like a distant plan with the growing inflation and the want to have a certain lifestyle. But fear not; you can get an early retirement with proper planning, especially under the guidance of a wealth management professional. So continue reading as this post highlights the 8 best tips to help you retire early and have a future without stress and worry.
1. Consult a Wealth Management Professional
If you’re planning to have an early retirement, the most efficient way to go about it would be to work in collaboration with a wealth management professional. A financial advisor or wealth management professional can help you determine whether your current investment strategy can help you meet your goals or not and also offer suggestions on how to improve it. They help you identify how much and where you can invest based on your risk profile, which is determined by factoring in your age, income, liabilities and obligations among other factors. After deducing your risk profile, they suggest available investment options to pick from.
2. Start Planning Early
The earlier you start planning and saving, the more likely you are to achieve your goal of early retirement. Starting early and investing in a retirement account from a young age gives you a better chance of meeting your retirement goals within your investment horizon, as it allows your money sufficient time to grow in the market. Consider allocating a portion of your income towards investment options like mutual funds and SIPs as they leverage the laws of compounding, giving you a better shot at early retirement. Besides, starting early gives you the liberty to take more risks, and experiment with other investment options as well.
3. Contribute to Your Workplace Retirement Plan
Another easy and accessible way to invest in your future is to take advantage of the retirement plan offered by your workplace, namely the provident fund (PF). Your retirement plan contribution is subtracted from your paycheck, which lowers your taxable income. Your employer usually matches the amount saved from your paycheck and adds it to your retirement savings plan or PF. Therefore, by leveraging your workplace retirement plan, you can get closer to achieving your early retirement goal.
4. Avoid Withdrawing from Your Retirement Account
Once you start setting aside a specific amount for your retirement, it is important to resist the temptation to use it prematurely. While unforeseen circumstances may arise or you may be tempted to dip into your retirement savings for a new purchase, it is crucial to prioritise the long-term benefits of investing. One of the most effective ways of investing is through mutual funds and SIPs, as the longer they are allowed to cook in the market, the more exponentially they tend to grow. Simply put, the longer you save, the greater your potential for growth and financial security during your retirement.
5. Budgeting Your Expenses
Another effective way to save for early retirement is to create fiscal space in your budget. This means finding ways to reduce your expenses to save more money. One way to do this is to identify any unused subscriptions or unnecessary expenses that you can eliminate. A financial advisor can help save money by suggesting ways to cut out just a few unnecessary expenses. Every little bit helps when you’re trying to save money. So, take some time to review your budget with the help of a wealth management professional and see where you can cut back. Even small changes can make a big difference over time and help you achieve your goal of getting an early retirement.
6. Pay Off Your Debts on Time
Another important tip to create fiscal space is to make sure that you pay off your debts on time. Debts like education loans, home loans, personal loans, auto loans, and credit cards tend to have higher interest rates and can significantly impact your financial goals. With the guidance of a wealth consultant, you can manage your debts and prevent them from severely impacting your retirement planning. Moreover, people who might be facing soaring debts and can’t pay them at once should prioritise them. They can pay off the higher interest debts first as that allows them to reduce future interest rates and redirect their finances somewhere else. Alternatively, they can pay off their smaller debts first and create fiscal space to use the remaining money to pay off larger debts. Either way, your debts should “retire” before you do.
7. Obtain Health Insurance Coverage
As you grow older, you are more likely to develop health issues and there’s a good chance that the medical inflation rates in India, which presently range between 15-20%, will eat up your savings and force you to withdraw from your retirement journey. This necessitates the need to have a good health insurance coverage plan to protect yourself from future health scares and critical illnesses. Health insurance can also cover the cost of your medical bills in case of an emergency. You should plan your present wisely by keeping your and your loved ones’ health in mind if you want to enjoy an early retirement. This may require you to sacrifice a few things now but it will all be worth it in the future.
8. Diversify Your Investments
As mentioned earlier, the best investment options for early retirement include, but are not limited to, mutual funds and SIPs. So, if you’re planning an early retirement, you can talk to your wealth management consultant about the various investment options that can help you achieve your goal. After paying your fixed expenses, consider allocating a percentage of your income to a savings account, PPF, stocks, real estate, or gold. Remember, that most of the investment assets are market linked and are vulnerable to market fluctuations to some extent. Therefore, diversifying your investments can be highly beneficial as it helps you manage and balance the losses faced in other sectors.
On a parting Note
Getting an early retirement is a dream of many, but only some are able to achieve this dream. Your vision of early retirement could be anything from spending more time with your family to having the freedom to travel more. But in order to accomplish your target, you need to plan your present and future wisely. From starting to plan early to budgeting your expenses and paying off your debts on time, you can implement these helpful tips to achieve early retirement with the help of a wealth manager and fulfil your dream of having a comfortable and stress-free future.
Please share your thoughts on this post by leaving a reply in the comments section. Also, check out our recent post on “Exploring Tax-Efficient Mutual Fund Strategies for the Indian Market.”
