Please wait...
Please wait...

Go Back to Main Page Head Start

‘Hi, I came across this interesting article on the Franklin Templeton website. Check it out!’
A Plan To Retire Younger

Many people opt for premature retirement, much before they are 60 years of age. This decision could be guided by medical, personal or professional reasons, or a combination of them. If you are also looking at premature retirement, you will need to make several changes, both big and small, in your strategy. You will have to shape your portfolio keeping the new goal in mind. You will also have to adapt to the new realities, both on the emotional and financial fronts. Here is how you should approach the issue and deal with the challenge.

How To Prepare For Early Retirement


Ask yourself the fundamental question: What will I do after retirement? If you don't have a clear answer, you might be in for tougher times. Also, get an idea of the kind of planning and investments required.

An early retirement might also require you to develop some new skills. Have an action plan for it. With rising life expectancy, the non-earning period spans almost 25 years for people retiring at 60. For those retiring early, it could be as long as 35-40 years. A longer retired life will mean a longer battle with the ill-effects of inflation. Accept that an early retirement may entail compromises and tweak your spending accordingly.


Your first step would be to get a fix on the retirement age. Next, prioritise your financial goals and have targets (in terms of the money needed) for each of them. Remember, the timing of some of your major financial goals, such as children's higher education and wedding, could well happen after retirement, if you exit prematurely.


Keep substantial savings in growth investments, such as stocks, equity mutual funds, real estate and gold, as, apart from giving you confidence, they help you create a buffer for uncertain times. Equities help you offset the damage caused by inflation, generating highest returns among all asset classes over the long term. Ideally, put 60-80 per cent of your assets in equities. Earmark each portfolio for a particular goal and, as you near it, start moving funds from volatile equities to less volatile debt assets to preserve the accumulated capital.


By the time your retire, you should own a house and, ideally, have paid off the home loan. If you don't plan to work after retirement, consider relocating to a place with a lower cost of living.


Ensure that you have a pure term insurance plan. Also, get health covers for yourself and your family members. Managing unforeseen risks is equally important while creating wealth and chasing goals.


A second career will position you better for meeting your financial goals. This is because besides regular pension, it will also bring you a monthly paycheque. Some of your unmet goals can be met through this income stream, although depending entirely on it is not suggested.


When you are planning, assume your age of retirement a little lower than what you would otherwise expect and your life expectancy slightly higher. This will ensure that you have an adequate surplus to meet contingencies in old age. Find out how much you should invest every month to save for an adequate retirement corpus. You can try systematic investment plans (SIPs) that capture the power of compounding. The earlier you start an SIP, the more your money will grow. Keep loans in check, especially unconstructive debt, such as credit card and personal loans. Last but not least, have a plan B in place to tackle any negative surprises.

Next To Come: Manage Your Money In Retirement q