Want to Retire Early and Enjoy Life, You can do it this way !!

Enjoying life is everyone’s dream. Given a choice many of us would like to get out of the corporate race, and spend time to pursue hobbies or like spending more time with family, travelling around the world,  philanthropy work or  even starting our own business. However most of us could not do it as we have various personal and family commitments which keep us on our daily routine working life.

So is there any solution to get out of the regular life and enjoy it, Let’s find out the ways and means to achieve this. 

1. First find out the Money Required:

The first step is to find out how much money will be required if we stop working.  It will have two figures: first the annual cash flow required for meeting regular expenses and secondly the size of the corpus needed to generate that much annual cash flows.

As a thumb rule we will need approximate 80% of pre-retirement expense (some working expenses like travelling etc may go away) to live same life style. However it can vary based on our future plans the actual number could vary. So first we need to get that figure which we need to meet our expenses.


2. Calculating the Retirement Corpus

We can expect that if we withdraw 4-5% of our investment portfolio we can comfortably live with that portfolio for our remaining life. This is based on the assumption that the corpus will generate around 6-10% annualised return.

Accordingly, let us assume that we need a monthly income of 50,000 i.e. annual income of Rs.6,00,000 per year, then you need to create a portfolio of Rs.1.20-1.50 crore which is 20-25 times of our annual required income. However we should also remember that prices will rise due to inflation and that is also to be factored in.

3. Increase the Income: 

Once we have arrived at the corpus size required, the next step is to create the corpus of that amount. For that we need to save as much as possible from our monthly income as well as one time cash flows like bonus etc.  Further if we believe that reaching the desired corpus is difficult by the time we wish to retire, then we should find out ways to enhance our income. There are multiple ways to enhance the income i.e. by improving our job skills/ qualifications, taking a part-time job, set up a side business etc or a combination of all. 

4. Borrow only for necessity: 

Borrowing means living on the future incomes, so if we want to build a sufficient retirement corpus we should keep away from unnecessary loans (like buying costly electronic items in EMIs) as it reduces our present cash flow to service the debt. Further if we are in habit of borrowing, we may carry some debt during your retirement period. This will increase the cost of living post retirement. This will result into bigger retirement corpus to service the debt too. 

5. Be Realistic:

Some time to show off the outer world we get into those kind of expenses which drains out our regular cash flows. Suppose if we buy a big house which is not required, we may end up paying bigger EMIs and maintenance cost, expensive furniture and fittings, utilities, etc. this leaves very little money to do anything else. If we get into these kind of expenses, building a retirement corpus will be more difficult So, our housing loan should be well within our comfort zone as it is not only a long-term expense but also have an impact on our future cash flows.

Retirement is nothing but financial independence. To achieve financial independence we need enough money to create income to support our lifestyle for the rest of your life without getting employed. Although it is difficult but still possible if we can apply the above strategies.