Categories: The SignalWeekly Dose

The Signal: How To Retire Early

Retirement is often pronounced as the end-all goal of working-cum-investing, marking the beginning of a new phase in one’s life. On a lighter note, retirement is characterized in 1 of 2 ways:

Waking up in the morning with nothing to do, and having retired before doing it
That period when you stop lying about your age and lying ‘round the house

Retirement is the 1 common goal we all aspire to enjoy care-free irrespective of working age, and socio-economic differences.

However, while India enjoys one of the healthiest work-friendly demographic distribution vis-à-vis other countries, it suffers from lack of planning for post-work life. This behavior has found new found attention across media outlets too, as is evidenced below:

In the interest of saving your time (read as: use saved time to plan for retirement!), let us summarize the observations made across the links mentioned below:

In India, private sector does not contain a robust pension policy with little-to-none government social security programme. This makes having retirement planning all the more necessary
~50%+ survey participants do not have any financial plan for post-work life, while allocating ~60% of income to current expenses
Retirement takes a back seat in financial priority with child and spousal security and even fitness ranking ahead
~50% are not aware of total financial plan required in and after retirement age
Barely 1 in 5 Indians considers the impact of inflation on returns while planning for their retirement

Your tomorrow (retirement) is going to defined by how you plan-&-act today. Lack of planning for post-work life will have you constantly dependent on a stream of regular income with no room for interruption, which in essence, is top contender for financial sin.

Unfortunately, the covid-19 lockdown transformed above observation into practice as working population resorted to loans and (more importantly) loan moratoriums to stay sans-scarce on a monetary front. A RBI study revealed how ~50% of total retail customers depended on moratorium facilities to curb pandemic hits.

In light of this information, remember that in today’s world, the only financial goal for which there is no loan facility is retirement.

As you get more worried and inclined about planning to save for retirement, this note is drafted to soothe your stress by shining light on how you can plant the seeds today to rest in the shade tomorrow.

As a kicker and to get you on your feet about the same, here are a few pre-&-post retirement expenses you can be expected to circumvent. As a bonus, one cannot predict the nature and degree of expenses. Examples are:

Where there’s a problem, there’s a problem waiting to be solved. Luckily to this, the answers are plenty and easy. How simple and easy?

Well, SIP is one of answers to this predicament. One of the best answers, in fact.

An illustration of the same is shown below:

Another essential element in saving for retirement is to act early. Many were caught off-guard last year in the wake of the pandemic cause of poor planning. The chart below highlights how delaying retirement planning significantly increases cost with delay interval of 5 years:

As is observed, delay of 5 years (Between Age 30 & 35) can increase your SIP amount by Rs. 24,982. The difference increases as lag increases.

There are a many other ways of saving tax. We intend to follow up on the same in newer light, courtesy of newer product mixes on the weekly editions to follow. So make sure to send in your reviews/comments on what/which details you want special focus on!

As always, we excitedly await to hear from you.

Till next time, Happy Weekend

Tejesh Kumar