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Make your wealth last with early retirement strategies

Retire in your 40s

Make your wealth last with early retirement strategies

RETIRE IN YOUR 40s: MAKE YOUR WEALTH LAST WITH EARLY RETIREMENT STRATEGIES

Working and meeting deadlines until sixty may not seem like the ideal life plan for many people. The stress and demands of a hectic job push many people towards early retirement. However, deciding to retire by the age of forty is a great idea only when you have planned and saved for it beforehand.

According to the Standard Chartered Wealth Expectancy Report, an average Indian will require a minimum of INR 93,000 per month to survive comfortably after retirement. Under such circumstances, a lack of planning or calculation error may land you in financial hardships towards the latter part of your life.

Though it’s never too early to start saving for your retirement, the planning must be more meticulous when you’ve set the age limit as early as forty. So, keeping that in mind here’s bringing you some ideas on how to make your wealth last when you decide to retire early.

Visualise your perfect retirement scenario

Retirement does not mean the exact same thing to everyone. If you are planning to retire in your forties, you should start thinking about how you want to spend the rest of your lifetime.

Here are some of the questions you should ask yourself:

  • Will your monthly expenditures come down or go up? Will you change your daily expenses?
  • Do you plan to travel once a year or for the most part of the year?
  • Do you plan to start your business or work part-time?
  • Do you want to start an NGO or volunteer at one? What about medical expenses?

Think deeply about all the answers because that will help you in coming up with a ballpark budget on the amount of money you need for a financially secure retirement.

It will also lead you to understand the other side of the equation, which is the amount of money you need to save to meet your future goals. Get your retirement calculations estimated with Standard Chartered Retirement Calculator. Check out now!

Estimate the growth potential of your savings

Once you have a clear picture of your long-term goals, consider the amount that you have already saved and the time you have until forty. It will give you an outline of the amount that you will need to be saving every year and every month to reach your goals.

Suppose you are twenty-five years old and earn INR 30,000 per month. You start saving at this point and want thirty lakh rupees’ worth of savings when you retire in your forties. But, even if you save half of your monthly income, you will only have about twenty-seven lakh rupees at the age of forty (assuming an 8.5% rate of return). Hence, you will have to make adjustments to either your savings plan, or your post-retirement expenditure plan. You also need to understand that a total saving of twenty-seven lakhs roughly translates to about five thousand and six hundred rupees every month till you reach the age of eighty – without considering inflation

It’s important to mention that this is nothing more than a simple example. Living off only five thousand six hundred rupees every month is difficult even if you make significant changes to your lifestyle.

You will also need to consider the rate of inflation and the fact that once you start ageing, your medical and healthcare needs will change, and it might take up a considerable amount of money.

Evaluate the ways to save more money

In most cases people not only need to plan on saving, but also consider the growth potential of the money you are saving. When it comes to saving more, you basically have two main options to bank on:

  • Re-evaluate your expenses as much as possible. Reduce the outflow of income by making simple changes, such as reducing expenditure on luxuries like frequent travel plans or leisure activities, using public transport instead of your private car, living in a less expensive part of the city, etc
  • Try to increase your income to invest more money. You can add to the existing cash flow by taking on a part-time job, doing freelance work and developing prudent investment strategies that can help increase your savings to meet your retirement goals. Check out options now!

Select the most profitable saving options for you

If you have a shorter window of saving, you will need to be more strategic about how the money is saved. An obvious choice would be going for a retirement plan that saves your taxes, while also letting you set aside a good amount when you are still working. Check out the latest retirement plans now!

Under the retirement plans, you must aim to contribute a significant portion of your income towards the plan. While the sum you decide to save might seem like a lot now, keep in mind that before you reach forty, you should be able to increase your income through promotions and raises. These factors will make it easier down the line, with the potential to even increase contribution in the future.

Investment Options to consider

In terms of investment strategies, you can make your money grow at a healthy rate by utilising investment vehicles, such as Systematic Investment Plans (SIPs) in equity mutual funds. SIPs tend to be extremely flexible, so you can invest as per your convenience and financial goals. To know more, click here!

When you consider the rupee cost averaging of such plans, you will understand that you stand to benefit as there is no need to time the market. You simply buy a high number of units when the market is low and vice-versa, and thus reduce your overall cost of investment.

You can choose to invest in the appropriate category of mutual funds depending on your risk appetite.

The bottom line

The key factor to remember is that retiring by forty means; you need to be proactive and remarkably good at delayed gratification. So, go ahead and start running the numbers and grab every opportunity to earn and save. The sooner you start considering your retirement strategies; the better are your chances of early retirement with the money that you need for enjoying it.

Disclaimer

This article is for information and educational purposes only. It is meant only for use as a reference tool. It has not been prepared for any particular person or class of persons. The products and services mentioned here may not be suitable for everyone and should not be used as a basis for making investment decisions. This article does not constitute investment advice nor is it an offer, solicitation or invitation to transact in any investment or insurance product. The value of investments and the income from them can go down as well as up, and you may not recover the amount of your original investment. Prior to transacting, you should obtain independent financial advice. In the event that you choose not to seek independent professional advice, you should consider whether the product is suitable for you. You should refer to the relevant offering documents for detailed information. Standard Chartered Bank is an AMFI-registered distributor of select mutual funds and third-party financial products and does not provide any investment advisory services.

Mutual Fund Investments are subject to market risk. Read scheme related documents carefully prior to investing. Past performance is not indicative of future returns.