Gone are the days when retirement meant sixty years. Today, early retirement is the new cool. Many people in India are looking to retire in their mid-forties or even earlier – you may not be the only one thinking on this line.
Even though early retirement is a new concept in India, it has gained popularity exponentially. However, just wanting to retire early will not make your dream a reality. You will have to work towards it. You have to become financially independent to retire. Let us look at what this term means, how you can retire early, and the role of technology.
What is financial independence?
Financial independence is simple – instead of you working for money, your money will work for you. How do you know if you have achieved financial independence? When your passive income becomes more than your active income, or you don’t have to depend on your 9 to 5 jobs, you have achieved financial independence. a
How to retire early?
If you want to retire early, you need to plan for it. Below are a few things you need to know and implement to retire early:
Determine the amount you need to retire – The first thing you need to figure out is the amount you need to retire. You would have heard people making statements like – ‘If I have Rs 1 crore in my account, I will retire.’ The calculation does not work on wild guesses. You need to sit down, make calculations and come to the amount you would need to retire. It will depend on your current living standard, your expenses, etc.
Evaluate where you stand now – You may be in your 20s or 30s and may or may not have invested anything. You need to evaluate your current financial position. It will help you determine what path you need to take to retire early.
Make a saving and investment plan – Once you know the amount you need to retire, you will have to make a saving and investment plan. The first step is to develop a habit of saving. Next, you have to make the right investment choices. Savings is only a seed, and if you want to grow it into a plant, you will have to invest your savings. Investing bears the fruits.
Protect yourself from life uncertainties – Once you start your financial journey for early retirement, you may face bumpy roads or unexpected turns. You must protect yourself from life uncertainties like medical emergencies. The cost of medical treatment in India is high, and if you don’t have insurance, it can eat up your savings/investments. To avoid such circumstances, get a health insurance plan.
Stick to your plan – The journey is long, and you will have many roads that will deviate you from your goal. You not only have to develop goals but also stick with your plan. One thing that will help you along the journey will be automating your savings and investments.
When to start planning for early retirement?
You have to start TODAY. The sooner you start investing for retirement, the easier it gets. The magic of compounding is an open secret in the world of investment. If you want it to work for you, you will have to start early.
Let us make you understand it with an example. There is three-person – A, B, and C and they start investing for retirement at the age of 25, 30, and 40, respectively.
They want to retire at 55, and they invest Rs 10,000 per month towards their retirement corpus. Assuming an 8% return, they will have a retirement corpus as below:
Person A – Rs 1.5 crore
Person B – Rs 96 lakh
Person C – Rs 35 lakh
Person C may not even have enough corpus to retire early (at 55). Everything was the same in this example, except the time when they started investment. We hope you are clear about why you need to start early. However, if you are late, no need to get disappointed. You can still make it.
Where to invest?
The most crucial question is – where to invest for retirement? There are many financial instruments in which you can invest your money to create a retirement corpus. However, the journey can never end or be completed in time if you are not investing in equity. You need to have exposure to equity if you want to retire early.
How can technology help you to retire early?
To sum up our discussion so far – you need to start early and need to invest in equity. If you are in your 20s, you may not have enough knowledge of the equity market. It could also be that you don’t have time or interest to spend time analyzing stocks, tracking the market, etc. What is the way out?
The solution is to make use of technology and specifically Artificial Intelligence. AI is changing the way investors invest in the stock market. With the help of AI, thousands of investors are investing and can make the most of the market without spending substantial time in the market.
We also mentioned above that you should not deviate from your path and have to automate your investment. Technology helps you with these points also.
Before you go
We have discussed everything you need to know to retire early. If you want to take the help of technology and AI in your journey, you can explore Jarvis Invest and take first towards financial independence and early retirement.