How to Retire Sooner and Richer in India?

7 min read • Published 7 November 2022
Written by Krishna Deshmukh
Learn how to gain financial independence for early retirement

Estimation of savings is an essential criteria for choosing retirement. Without sufficient savings, you may be left with inadequate funds for your post-retirement period, while higher savings leaves you with more options to spend. However, only saving money is not sufficient for wealth accumulation, you also need to plan your investments. 

If you want the answer to the million-dollar question of ‘how to retire early, read on. 

Tips to Retire Sooner and Richer

Assessing your financial viability after retirement is like planning a vacation. You check the trip itinerary, analyse costs, and maximise satisfaction while planning a trip. Similarly, you need to estimate your savings and expenses post-retirement. Further, as you decide on a specific amount to make the trip satisfactory, you need to finalise a rough figure that will suffice your post-retirement needs. Here are ten tips on how to retire sooner and richer without being too frugal.   

Decide your Retirement Age 

Retiring with a sufficient corpus to maintain a rich lifestyle is not an impossible task. However, retiring sooner with the same riches might not be feasible for everyone. Therefore, defining a retirement age is crucial and is the first step in making a retirement plan. 

If you plan to end your monotonous work schedule before 40, you should make a preliminary analysis of your requirements and save accordingly. Experts recommend adhering to the written goals to balance cash flow and living standards.

Reduce Expenses without Compromising on Comfort

Aggressive savings and cutting down on expenditures are important pointers you must consider in your retirement plan. However, spending less to save more can eventually hurt your quality of life. So figure out all the expenses that you don’t require, such as expensive trips. Further, consider comparing costs of recurring expenses like insurance plans and switch to more economical plans.

Additionally, spending your corpus on depreciating assets violates the wealth-building equation. Consult your family members before making considerable investments. Calculate the annual growth rate of your assets and adjust your living standard accordingly. 

Also Read: Step-By-Step Guide to Efficient Retirement Planning

Reduce Debts

It is important that you are not having a large chunk of high interest paying debt. Longer you hold on to these loans, you will have to pay more interest which can burden your cash inflows. Unmanageable debt can also affect your mental health and influence your decisions. So, Consider making realistic plans for clearing all financial liabilities before you choose to retire. 

You can make a list of all your debt obligations and their associated interest rates, to prioritise paying debt with a higher interest rate first. 

Always make room for emergencies

Consider making a cash reserve specifically for unplanned expenditures. Covering unexpected expenses like medical bills may consume the lion’s share of your retirement corpus. Keeping aside emergency funds that will cover at least 6 months of living expenses is a must. Experts recommend using emergency funds to cover such expenses instead of opting for debts which will further increase your liabilities by charging high interest rates. 

Further, ensure that your emergency fund has high liquidity and allows immediate withdrawal without an exit load. Additionally, consider keeping track of the inflation rate that can devalue your reserves. 

Also Read: List of Best Places to Live after Retirement in India

Analyse your retirement corpus

Consider your retirement corpus as your sole cash reserve after retirement, keeping the emergency funds aside. Your retirement corpus should account for your monthly expenses and the inflation rate. Additionally, the retirement corpus varies proportionately with your retirement age. 

You can choose to appreciate your corpus by investing a portion in low-risk moderate-return assets such as senior citizen’s savings schemes which provide assured returns annually. 

Accommodate inflation: 

Saving for retirement is a long process, and considering inflation is key to planning your future finances properly. As you near your retirement, your expenses will grow; inflation will increase your current living expenses to a much higher level at the time of your retirement. 

Hence, your savings and returns from investments should ideally align to meet the inflated prices. 

Experts suggest considering a 6% inflation rate for retirement planning. You can use various online retirement planning calculators to find out the future value of your present income. This will help you calculate the amount that you must acquire in the future to lead a financially secure retired life.  

Reduce your tax liabilities

Since revenues attract taxes, reducing your tax liabilities should be your primary objective to increase your in-hand income.  Aim to maximise your tax deductions on all income sources. Government schemes and insurance plans are considered low-risk avenues that offer multiple tax benefits; these can help you save your retirement corpus.  

Again, investments in health insurance policies, tax-saving fixed deposits, etc., also offer  tax deductions under various sections of the IT Act. In addition, allocating funds to tax-free investment avenues such as ELSS funds can reduce your tax liabilities. You may also consider getting tax deductions on your pre-retirement salary through home/education loans, long-term capital gains, sale of equity shares, etc.  

Also Read: What To Do After Retirement in India ?

Plan your asset allocation wisely

If you plan to retire earlier with considerable assets, you must allocate them wisely. When you are young, you have a considerably high risk tolerance level. You can choose from a range of moderate to high risk investment options such as stocks, real estate investment trusts (REITs), commodities and other securities. 

Moreover,  the earlier you start with your investments, the more time you will have to get benefitted from the compounding of returns and absorb any losses during the accumulation period. 

However, as your risk tolerance decreases with age, you may want to invest in low-return instruments like fixed deposits, etc. Your portfolio should maintain a balance of different investment choices depending on your withdrawal and risk tolerance choice. 

Also Read: Step-By-Step Approach To Retirement Planning

Final Word

If you are still wondering how to retire early with a considerable corpus, you must first, reconsider why you want to retire early in the first place – to live a fulfilling life away from the monotony of a work schedule. While many people do like to retire early, only a few have the financial resources, planning skills, and discipline to do so. Hence, you should focus on building a strategy to save your income as well as invest it in suitable instruments. 

Frequently Asked Questions 

Is it advisable to live in a rented apartment after early retirement?

Renting is a good option for people who want to enjoy different locations or lifestyles without the commitment and hassle involved with buying one’s own home. However, a big downside of renting is that you are losing on the income that the same money would have generated via investing. 

How do financial advisors help? 

Irrespective of the market condition, you can reap substantial profits from investments if you understand the volatility of returns. However, wrong moves can affect your investment corpus and defer your retirement plans. A financial advisor will help you undertake the process efficiently and manage your portfolio effectively. 

Can I take loans after early retirement?

Minimising your debts should be the focus for early retirement. However, many non-banking financial institutions offer loans to retirees with flexible tenure, minimal paperwork, and affordable interest rates. Check the eligibility criteria for these loans.

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Krishna Deshmukh

Investment Principal
Krishna is an investment professional with a demonstrated history of working in Debt Capital Markets. He has completed his B.E. (Hons) in Computer Science Engineering from BITS Pilani and MBA (Finance) from JBIMS, Mumbai. He is currently working as Investments Principal at Wint Wealth. Previously he worked at Kotak Mahindra Bank at their DCM desk and Northern Arc Capital at their Structured Finance desk.

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