Retirement planning is critical to maintaining your desired lifestyle after leaving the workforce. Sapna Narang, managing partner at Capital League, highlighted that effective retirement planning involves accumulating income-generating assets to replace a salary.
“This allows retirees to maintain their lifestyle,” he said.
Growing needs for retirement funds
As advances in health care lead to longer lives, the need for a larger retirement fund increases.
Narang noted: “As life expectancy increases, the retirement capital needed to support a longer retirement period also increases. If the duration of work is reduced, the capital needed will increase.”
How to balance early retirement with your current lifestyle
To balance Saving for early retirement Considering current expenses, Narang advised defining retirement goals first. “The starting point for planning early retirement is to define the retirement age and the lifestyle you want to finance. This will determine the retirement capital needed.”
He stressed the importance of saving and investing in a disciplined manner, noting that “the more luxurious the lifestyle you aspire to, the greater the capital you need. You need to spend frugally and maintain a modest lifestyle to accumulate the funds you need for retirement.”
Achieving financial independence
Financial independence means having enough assets to support your lifestyle during retirement.
Narang outlined the steps to achieve this goal: “To create a corpus of financial independence, follow prudent financial planning guidelines. Invest regularly, avoid credit card debt, have health insurance, and build an emergency fund. Diversify investments and create multiple sources of income, such as real estate, bonds, and stocks.”
Investment allocation
Investment strategies must be aligned with each individual’s risk profile.
Narang advised: “Investment allocation should be determined based on the risk profile of the investor. Gen Z and millennials should tailor their investment approach based on their risk tolerance and long-term goals.”
Determining early retirement age
Narang explained that the age for Early retirement It depends on each person’s ability to finance their desired lifestyle.
For example, “if a 40-year-old currently spends ₹2 lakh per month and wants to retire at 50, with a portfolio of 50% equity and 50% debt, an inflation rate of 5% and a life expectancy of up to 90, the required retirement capital would be ₹9.17 crore.”
If the required corpus appears unattainable with current investments, adjustments may be necessary.
“Either you should reduce your desired lifestyle, or you should extend your working life,” Narang advised.
Investing for early retirement
To invest for early retirement, Narang suggested setting clear financial goals and creating a plan.
“Define your financial goal in terms of amount and duration. Invest regularly and make a plan to save the necessary amount annually. Spend below your means, avoid debt and, if necessary, pay off debt as quickly as possible. Diversify assets and periodically review your plan with a financial planner. Achieving financial independence is a marathon, not a sprint. Continuing education about investments is key,” he said.
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