Why retire early?
The individuals with high salaries accumulate so much wealth by the age of 45 that, they can fall back on that money for their future. These individuals have short working hours, so that, they can spend time with their family members and with it pursue their hobbies and other interests. People exit their careers in a hope of escaping from the mounting work pressure. This trend is more apparent in slow growing sectors. India’s demographic is one of the important factorsaswell. Young force is joining the economy at a high rate and at lower cost, to which employers involuntary have to continuously edge out the older workforce with incentives.
Before retirement, it is important that the individual is sure of all the options available for him/her. Upgrading their skills is very important. Investing money in learning how to manage the funds after they retire can be a very good option. The early an individual wishes to retire, more he has to save during their working years. Investing aggressively for the future is the only way an individual can survive the future.
- Contingency plan: A contingency plan to survive the first six months after retirement should be developed. Adequate protection of life and health insurance should be taken up. A loss of the job at an older age can prove detrimental for taking up health cover by the insurers.
- Alternative income:Avoiding over-leverage can be good. Before taking up loans, the repayment of it should be considered first. An alternate income stream should be developed as dependence upon the entire investments cannot be undertaken to sustain after retirement.
- Right, portfolio:A 15% return on the investment is necessary to sustain. Getting this high returns can be only probable with correct asset allocation in the portfolio. This asset allocation must take into consideration the risk taking ability and time left for the retirement for the individual.
- Equity-based instrument:To achieve a target for more than 10 years, the portfolio should be in favour of 70% equity. As an employee, already the retirement portfolio includes the fixed income instrument as Employee Provident Fund (EPF) so directing the other investments towards equity-based instruments can prove profitable.
- Diversified portfolio: Having a diversified equity/debt funds and Equity Linked Savings Scheme (ELSS) will not only earn returns but also diversify and divide the risk among the portfolio. Keeping 40% large cap growth funds, 30% mid cap, 20% international funds and 10% value-oriented funds or keeping EPF, PPF and debt mutual funds can be the options available for investors.
- Real estate investment:Investing in Real Estate not only provides returns but also is a saving turned into an asset. Leasing out the property can earn rental as high as 6-7%.
- Investment in Plots: The prices of Plots keep appreciating and it gives a return as high as 18-20% every year. Buying a plot in the suburbs or near the highway, holding the plot up for 3 years and then selling it can result in high profits. This capital appreciation can be used to meet the retirement expenses and the principal can be re-invested.
- Don’t stop working:A regular income, even if very low can go a long way by reducing the burden upon the savings.
If planned properly and accurately, retirement can be a pleasant and leisure experience as the investor would have foreseen it to be.