The ultimate guide to early retirement and financial freedom


By Mahesh Pai

If early retirement and financial freedom is the goal then financial literacy is how you get there. You can’t have one without the other. Early retirement planning is an art. Only a well designed plan will allow one to retire early. The earlier this retirement plan is carried out, the easier it is to get there. Planning for a retirement is not an option but a necessity now.

Early retirement

Early retirement doesn’t mean you’re supposed to stop working, it means achieving financial freedom to work on things you like, Lots of people would like an early escape from the rat race and pursue a passion project, start a business, travel the world, volunteer, or just stop working. A lot of people say they want to retire early, but they don’t actually paint a picture of what early retirement looks like for them. Knowing your goals for your early retirement will also dictate how much you
need to save.

There are people who have retired before 40. You may think that they were extremely intelligent who must have probably come up with some start up and sold it and earned crores and that’s how they achieved their early retirement. But that’s not the fact. A normal salaried employee can also attain financial freedom and early retirement if they plan for it wisely.

But there are times when a business owner who earns more than a salaried employee yet is unable to save for his retirement. The only difference is discipline. A person with average intelligence but above average discipline can actually
make more.

Traditional retirement

We have seen our elders retire at 60 and by that time they would likely accumulate enough money that would last for the rest of their lives. There were two reasons why our elders would work till 60, one would be having loans to be repaid and second, most of their saving would be gone half way due to child’s education and marriage.

So now are you wondering how to retire early?

A careful planning and a strict financial discipline and a regular investment can definitely help you in the long run. You have to create a corpus and make enough returns on that corpus that you and your family can live off the returns and yet the principle will remain with you forever. For that we have to invest into products which will not only beat inflation but also cover annual expense.

Traditionally people believed and followed this simple rule of income- expense = savings but to achieve early retirement and other financial goals the rule changes a bit. It turns into income – savings = expense. Consistency is the key to reach any financial goal, you have to first save from your income and then spend. When you try to save what remains by the end of the month, you end up saving an amount which doesn’t fulfil your early retirement fund. You have to accumulate money which has to last for 50-60 years.

The future is filled with uncertainty. Whether you are working in your 20s, 30s, 40s, you will never know what’s going to happen when you finally retire. Major problem for people while retirement planning is the belief that they don’t need it in the first place. Many of them think that their high income will be able to sustain them for a long time and own assets which they feel will generate income regularly. But according to statistics these sources are likely to dry up in the long term.

Here are five questions you should ask yourself when it comes to understanding when should your retirement starts.

             What is your duration to work? – How many years do you wish to work?

             What is your ideal age of retirement? At what age would you want to retire?

             How long will be your duration of life? How long do you possibly think you can live considering the improvement of technology and health care?

             How long will be your duration of retired life be?  How many years would you stay retired?

             Will you be financially dependent or independent?  Will you require your future generation to take care of you?

             Answering these questions will potentially help you identify the right age of retirement 

Can you retire early and still work?

Early retirement is not about stopping to work, but rather gaining complete control of
your time.

Plan your retirement in such a way as though you are going to live for 100 years. Many people would like to retire early, but few have the financial resources, planning skills, and discipline to do so. Work with a qualified and professional financial consultant who can help you manage your finances before and during retirement so that you can live a stress free life. Choosing the right company and the right product
is the key.

The writer is a financial advisor and runs a consultancy firm, Mahesh Pai’s 
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