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2-min read

5 Things to Consider Before Planning Early Retirement

If you are intending to take an early retirement here is a list of 5 things that you must take into consideration.

Contributor Content

Updated:September 19, 2017, 1:36 PM IST
5 Things to Consider Before Planning Early Retirement
(Image only for representational purpose)

Early Retirement is a tempting proposition however; retiring early also requires a higher amount of savings for utilization after retirement. You will have to chalk out a proper plan pertaining to the finances and savings on which you plan to rely after retirement. If you are intending to take an early retirement here is a list of 5 things that you must take into consideration:

1. Time Duration after Retirement

If you retire early, automatically the time duration post retirement will considerably increase and thus you’ll need a substantially higher amount of savings to get you through that phase. While planning out the finances always keep in mind factors like inflation, investments, monthly returns on investments, emergency situations, health conditions, etc. Inflation needs to be paid some serious attention as this is one factor that never stops and is ever increasing.

2. Long Term Financial Goals

Sudden plans of retiring early may not coincide with the time of receipt of various returns and benefits from financial ventures that you have invested in, thus there might be a risk that in the initial years post retirement that your savings may run out. Thus, in such a case it is quite crucial that you determine the financial needs along with your accumulated savings and other sources of finances that you could rely on in case of insufficient funds.

3. Less Time to Save

If you retire early, you will also have less time to collect a huge amount of savings and simultaneously, retiring early will require more savings. Thus to get out of this conflicted situation, you will be required to determine you financial assets and sources of income post retirement along with a serious consideration to growth assets while you’re collecting them as well as post retirement period when you will actually be dependent on it.

4. Higher Investment Risk

When you decide that you are retiring early, you desperately try to collect and accumulate as much wealth as you can in a short period of time. For this, you invest in the share market which is pure gamble and comes with a high level of risk. On the other hand, some people who are not willing to take a risk, invest more in debt instruments. It is crucial and tricky to strike the right balance between risky share market investments and debt instruments.

5. Inheritance Needs to be Managed

When a person decides to retire early, it’s not just his expenses that he needs to worry about but also has to bear the expenses another person dependent on him or her usually, the life partner, thus he needs enough for 2 people. Life is inevitable and thus, you need to plan for emergency situations as well thus, it’s very important that you have a very specific and precise will in place so as to avoid any hassles for the person dependent and surviving you in case of any emergency situation.

| Edited by: Huma Tabassum
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