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If you are around 30, 40, 50, then the idea of ​​retiring prematurely must have come to your mind. But you may have overlooked it thinking that it is a wonderful but difficult proposition. But your doubts related to premature retirement can be resolved if you start planning for it and prepare a financial strategy. Financial planning matters a lot in premature retirement. Moreover, it requires a whole lot of discipline, patience, clear thinking and a consistent focus to meet your financial goals like buying a house.

Your preparation for retirement should begin the moment you decide that you don’t want to live the 9 to 5 o’clock life. With this decision, you should start working on the plans on the basis of which you want to make your living. To help you with this, here is some guidance on how to retire early.

start on time

For premature quitting, 15-20 years of disciplined savings and investments proves to be a good thing. If you are 30 years old, you are in a very comfortable position for premature retirement. But the longer it is delayed, the more difficult it will become to achieve the goal of premature retirement. So, start on time.

Save more and invest more

In general, it is recommended that you save 20% of your take-home income. But if you want to retire early, set a target of increasing it to 33%. The more you save, the better for you. Smart budgeting matters a lot. Control your expenses and cut them drastically. Not only is it important to save but it is equally important to invest aggressively to get high, inflation-high returns. Invest your savings and don’t keep them as deposits in banks.

invest in the market

When your goal is to retire early, investing for assured returns will not get you very close to your destination. You need an aggressive investment plan that gives you high returns to increase your wealth. Hence, you have to invest in securities market to get high returns. Equity investing is the best way to grow. You have to decide whether to divert a large portion of your savings into market-linked investments in the form of equities. Considering the tenure of 15-20 years, you can get good returns which you need for premature retirement. You can also invest in top-rated Equity Mutual Funds with proven track record. If you have an understanding of the stock market, you can invest directly in stocks where you need to include a good mix of large-cap as well as mid- and small-cap companies in your portfolio. You can take the help of a good financial advisor for this. Don’t forget to reconsider your investments to see how market volatility and average inflation rates affect them.

keep increasing your investment

With each passing year, as your salary increases, keep increasing your investments in equity-linked funds by 5-10 per cent or more as per your financial convenience. Remember, the compounding effect of the increased investment will be spectacular in the years to come.

Make important insurance decisions around age 30

At the age of 30, considering a good family health insurance plan that covers you, your spouse and children is absolutely the right move. If you live in urban areas, start with a coverage of at least Rs 10 lakh. You must get this coverage before you or your spouse has to suffer health problems. This is the best age to get this coverage. Buying health insurance at a young age will help you keep your premiums low, which will help you through your retirement. Remember that retiring from work also means that you will no longer get the associated benefits. Generally employed persons are provided coverage of group insurance policy by their employer. A health insurance policy will ensure that any major health-related expenses will not hit your pocket when you leave your job.

At this stage, you can also consider buying a term insurance plan for the financial protection of your dependents. Choose a long term term plan of 35-40 years from which you will get insurance coverage till the age of 75 years. Take adequate coverage- usually it should be 10-20 times your current annual income. A term plan will enable you to remain stress-free regarding the financial well-being of your family due to your untimely death.

Pay off your existing debts

It is wise that you should not have any debt after your retirement. You should ensure that you should not have any debt such as home loan repayment, car loan repayment and any other kind of borrowing. You should not have any such loan before your retirement. So, when you plan for retirement, also devise a money strategy that will help you pay off your existing debts. While doing this, first you should take out loans with higher interest rates and then lower interest rates.

Conclusion

Premature retirement means attaining financial independence. Premature retirement planning is based on aggressively saving and investing to retire from a regular job so that you can pursue your hobbies later. So, once you have decided to retire, you should have enough money for your post-retirement living. One plan may not be suitable for all for premature retirement. So, work on a plan that will prove to be right for you. Also, try to build an emergency fund to meet any unforeseen financial challenges in the coming years.

(The author of this article is Adil Shetty, CEO, BankBazaar.com)
(Disclaimer: This information is being given on the basis of expert reports. Markets are subject to risks, so take your own advice before investing.) (This article is written for informational purposes only. It is for investment purposes only.) should not be construed as financial or other advice)