Many working professionals in India think about retiring early, especially after a long or stressful day at work. The idea of enjoying a peaceful life by 50 or even 45 sounds great. But the truth is, retiring early is not just about quitting your job—it’s about managing money smartly for the next 30–40 years.
If you’re in your early 30s and dream of stepping away from work by age 50, you still have time to make this dream a reality. But you need a strong financial plan to support it. Let’s understand how much you need, what steps to follow, and what risks to avoid.
How Much Money Do You Need for Early Retirement in India?
Suppose you are 32 years old now and want to retire at 50. You will have 18 years to save and invest. After that, you may live till 85–90. That means you’ll need to cover 35–40 years of life without regular income.
Let’s say your current yearly expense is Rs. 7.5 lakh, and you expect inflation to rise at 6% per year. If you want to maintain the same lifestyle in retirement and earn around 7–8% return on your investments, then you may need a retirement fund of Rs. 6 crore to Rs. 7 crore by the time you are 50.
This fund should last you till 90 if invested wisely and withdrawn carefully. But that’s just the base amount.
Early Retirement Needs More Than Just a Big Fund
Having ₹6–7 crore sounds great, but early retirement brings more responsibilities:
- Children’s education and marriage – These are big expenses that come after retirement if your kids are young now. You need separate savings for this.
- Health expenses – Even if you have health insurance, not everything is covered. You must keep an emergency health fund for sudden surgeries or hospital stays.
- Lifestyle expenses – Buying a car, renovating your home, or celebrating family functions may not be monthly costs, but can shake up your budget.
- Longer retirement for spouse – If your spouse is younger or doesn’t earn, your plan must cover their needs for a longer time.
- Unknown risks – Life is full of surprises. Wrong investment decisions, medical emergencies, or poor returns in the early years of retirement can eat up your funds faster than expected.
Sequence-of-Returns Risk: What You Must Know
One of the biggest dangers of early retirement is sequence-of-returns risk. It means if the market performs badly just after your retirement and you withdraw from your investments, your portfolio may shrink quickly.
In retirement, your money must grow even when you are not earning. So, poor returns early on can finish your savings. That’s why asset allocation and withdrawal strategy are very important.
How to Prepare for Early Retirement: Step-by-Step Guide
1. Start Investing Early
If you plan to retire early, start investing from your 20s. Use SIPs in mutual funds, PPF, NPS, and EPF to build long-term wealth.
2. Set a Clear Target
Calculate your current yearly expense and use the inflation rate to see what your expense will be after 20 years. Multiply that by the number of years you’ll live post-retirement.
3. Split Your Investments
Go for a 60:40 ratio of equity to debt during working years. Near retirement, slowly shift to more debt (low-risk) funds.
4. Keep Emergency Funds
Always keep separate funds for medical emergencies, house repairs, and other big surprise costs.
5. Review Your Plan Every Year
Track your goals and adjust based on new income, expenses, or market conditions.
6. Don’t Count Only on Returns
Avoid being too hopeful about investment returns. Plan with realistic return expectations (7–8% on average post-retirement).
Maintain Work-Life Balance While Planning
While planning for early retirement, don’t forget to live in the present. Enjoy your current life while preparing for the future. Don’t skip vacations, celebrations, or hobbies just to save every rupee. Balance is the key.
A huge fund at 50 means nothing if you have no memories or happiness to look back on. So, aim for financial freedom, not just an early exit from work.
Early Retirement Planning Mistakes to Avoid
- Underestimating inflation – Expenses will increase with time. Plan your fund accordingly.
- Overestimating returns – Don’t assume double-digit returns after retirement.
- Not considering spouse’s needs – Your plan should support both lives.
- Skipping expert help – Always speak to a certified financial planner when planning big financial goals.
- Not updating plans regularly – Life changes, and so should your financial plan.
Sources:
Economic Times, Business Standard, Mint
Disclaimer:
This article is for information purposes only. Please consult a certified financial advisor before making investment or retirement-related decisions.
