Most of us want to retire early but hardly do we plan for a better retirement when we are working. To add to that some ill-planned money moves can also ruin the dream of early retirement. Some steps we should take to retire early:
Start investing early
Ideally, one should start planning his retirement immediately after he starts working. Your basic retirement planning tool – employee provident fund (EPF) starts contributing to the corpus from your first salary. The beauty of compounding means that the longer you manage to stay invested the larger corpus you can build or to reach a certain target corpus you need to save less monthly.
Many individuals believe that building a retirement corpus is all about smart investing but one has to also protect the retirement kitty. One hospitalization in your family can give a big financial shock if you are not covered under health insurance. Many people spend lakhs on the interiors of their house. A fire at one’s home can drill a big hole in his pocket. Buy health, accident and home insurance. The small outgo towards the premium will ensure that your retirement is not delayed.
Invest aggressively to make your money grow faster
Retirement is a long-term goal so it makes sense to invest in assets that generate higher returns albeit with some volatility. Stocks help you beat inflation in long term and ensure that your retirement is well funded. The volatility is taken care of in the long term. If you are investing in only safer options such as fixed deposit and fixed income options such as EPF, then you run the risk of an inadequate funding for retirement. That said you should also not be reckless with your retirement goals. In a hurry to retire early, some individuals resort to high risk bets like day-trading, gambling or betting big on illiquid assets such as land, property which may go wrong.
Don’t take big loans early in life
Many individuals end up buying house too early in their working life funded with a home loan, which stretches the cash flows of the individuals, forcing him to save little for retirement. Many young individuals are keen on buying the electronic gadgets, vacations and super-bikes on installments. These loans add up and act as a big obstacle on the road to better retirement planning.
Don’t use retirement funds for other goals
Many individuals use the money kept aside for retirement to achieve other financial goals. As far as the genuine needs such as one’s kid’s education is concerned, it makes sense to go for an education loan. You can raise a loan for almost all reasons, but not for living through retired life.
Plan your retirement early, and start working towards your plan as you work. Procrastination and recklessness can only put you off the track.
Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata.He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’