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What Is Early Retirement & How to Plan for It?

The decision of an individual to retire depends majorly on factors like lifestyle goals, financial capabilities and unfulfilled hobbies. Although the average age to retire in India is around 60, people nowadays are planning for early retirement to meet new opportunities.

Before finding out the best way to retire early, let’s discuss what early retirement is!

What Is an Early Retirement?

Early retirement is when an individual stops working or quits his/her job before the usual statutory retirement age. For example, retirement in someone’s late 40s can be considered early retirement.

Early retirement is usually planned due to someone's incapability to work further or achieve specific goals. For instance, an individual might go for early retirement to pursue his/her passion for cooking and turn this passion into a source of income.

However, in some instances, one might not plan for early retirement, and the individual might need more assets to last longer. Thus, every individual, whether or not they want an early retirement, should plan for it to be financially secure.

What Is Considered the Early Retirement Age?

For private sector employees, the average age range for retirement can be anything between 60 to 65 years. On the other hand, government employees usually retire when they attain 60 years of age.

It can be considered early retirement if anyone plans to retire before this age. Thus, any age below 60 years can be referred to as early retirement age. Nevertheless, it is ideal to assess your financial responsibilities before deciding your preferred retirement age.

How to Plan for Early Retirement?

Here are five simple tips that can help you plan a secured early retirement

1. Start Planning Early

The first criterion for early retirement is early planning, mainly from the day you start earning. Unlike others, who plan a regular retirement, you shouldn’t postpone your financial planning even by one year.

2. Estimate Your Expenses

You must budget for the daily expenses post-retirement. This early financial planning will help you estimate your expenses and plan your investments accordingly.

3. Make the Right Savings and Investment Plan

If you make a perfect savings and investment plan by allotting your funds correctly, you can earn good returns on retirement. However, ensure your current income is sufficient to bear your investments and strive to avoid recurring debt.

4. Actively Manage Your Investment Portfolio

To maximise your returns, investing regularly and managing your investments actively is vital. You must understand which investments will suit you based on your retirement fund plans.

5. Get Health Insurance

An individual will likely encounter more health problems as they grow older. Hence, it is essential to have health insurance to protect you from critical illnesses and medical emergencies during old age.

If you make these small sacrifices to your lifestyle now, you can enjoy a stress-free life post-retirement. However, it is equally important to enjoy your present life to live a fulfilled retired life. Thus, follow these simple, early retirement planning tips to live the golden years of your life peacefully.

FAQs about Early Retirement

What are the main indications for early retirement?

Some indications to know whether you are ready for early retirement are as follows:

If you are free from all your debts like loans, mortgages, credit card dues, etc.
If you have enough funds to support your dependents and their needs.
If you have saved and invested aggressively in your entire working period and have sufficient liquid funds.

Is early retirement a good idea?

Early retirement is a good idea if you plan it accordingly and use it to pursue creative or personal interests. Additionally, it can benefit people who wish to live a life away from the mundane complexities of work-life.

However, it is essential to remember that early retirement is not suitable for everyone, and you should consider all your needs before making any decision.

What are the cons of retiring early?

Although early retirement brings benefits, some cons are also associated with it. These include insecurity, the strain on savings and retirement benefits, a potential health insurance crunch and cutting living costs.

Important Articles about Early Retirement Plan

Early Retirement vs Late Retirement

Planning Early Retirement

Benefits of Early Retirement

Tips for Early Retirement Planning

Other Important Articles Related to Retirement & Pension Plans

Single Premium Pension Plan

Unit Linked Pension Plans

Defined Benefit Pension Plan

Retirement Planning

Retirement Age

Early Retirement

Retirement Investment Plans in India

Retirement & Pension Plan Guides

Guaranteed Pension Plan

Disclaimer

This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.