FIRE stories: Why and how Indians are achieving financial independence

At one time, Karan Datta headed the business operations of Axis Mutual Fund. Now, Datta, 53, spends three hours in the gym daily, about two hours sprinting 100-metre dashes and another two hours studying. “The new status symbol is the waistline,” says the former chief business officer.

Sandeep Agarwal, 47, who was earlier heading BNP Paribas’ fixed income sales (Gulf region) out of Dubai, now spends his time farming in a remote village in India, trading equity options, and just lazing around.

 

 

And that is also the case with Vijay Tangirala, 45 who decided to quit his corporate job. He’s one of the few dads in a gathering of moms at his daughter’s school meetings.

Handa, Datta, Agarwal and Tangirala are among the few people who have a lot of time on their hands, thanks to FIRE. The acronym stands for financial independence, retire early. Mint interviewed them to find out how they have taken advantage of FIRE.

Accumulation

Lockdown was a life-changing period for Handa. He realized that his job did not excite him anymore. By that time, he had accumulated nearly ₹7 crore. His business (Handa Ka Funda) was already very profitable and he had invested a huge chunk of his savings, nearly 70%, in equity mutual funds.

“My job paid me well but I didn’t want to work anymore. I wanted to spend more time with my newborn too,” said Handa, who decided to retire at 38. Around this time, his company was acquired by Unacademy but Handa said the payoff from that formed just a minuscule portion of his retirement corpus. He retired with ₹12 crore, invested across various financial assets.

Datta was 40 years old when he convinced himself to leave the corporate world before he could turn 50. He retired from Axis MF at 48. “You can either earn more money or invest in yourself between the ages of 50 and 60,” says Datta, who is now training to find a spot in India’s athletics team for the 55-60 age group .

What helped accelerate his retirement was a combination of stock options and bonuses that he got. He also had a systematic investment plan (SIP) book that was running for more than a decade. It helped that he also owned a house in Delhi. Earlier, he stayed in a rented accommodation in Mumbai. Datta retired with a corpus of ₹18 crore.

Agarwal’s retirement was totally unplanned. In a twist of events, BNP Paribas decided to shift operations from Dubai (where he was heading the corporate fixed-income sales of the region) to its regional headquarters in Bahrain. But since he and his family weren’t keen on moving to Bahrain, he quit his job and decided to take a 6-8 month break. This break kept extending until it became permanent. “I kept extending this break in the hope of finding better job opportunities but I found nothing,” says Agarwal, who then decided to return to India. He retired at 38. “Taking a break was never an issue as my company paid me well and I was also saving up all this while.” Although Agarwal did not disclose his corpus, he said he had saved up 100 times his current annual expense.

Tangirala’s early retirement, too, was unplanned. He was working in a bank in Thailand when his employer decided on a cost-cutting exercise. Tangirala was offered two options: work for a lower salary or take severance pay and leave. He chose the latter. He was a conscious spender and managed to invest around 70% of his income (post-tax) despite having to raise two children. It also helped that he was driving a Honda City when his two subordinates drove a Mercedes and a BMW, he says with a chuckle.

Tangirala also saved 90% of his bonus amount. All this was invested in equity mutual funds and an apartment in Mumbai. He has been investing the rental income from the apartment in a SIP for mutual funds. “If I don’t have the money lying in my account, I don’t feel like spending it,” says Tangirala. He retired at 44 with a corpus amount that was 30 times his annual expense.

Withdrawal

Post-retirement, people need to maintain a corpus that takes care of their monthly and emergency needs.

And that is where a sustainable withdrawal plan (SWP) helps. One can withdraw money without exhausting the corpus during their lifetime (See graphic).

Ravi Handa follows a three-bucket approach to manage his expenses. That’s one bucket each for liquidity, safety, and wealth creation. The first includes daily expenses and emergency amounts he needs for the next two to three years. This is invested in savings accounts and short-term debt funds, and a part of it is kept in cash. A safety bucket is necessary to ensure that the liquidity bucket can last longer. Also, having enough in this bucket would help in case there is a bear phase. This bucket comprises long-term bonds, debt funds, balanced funds, and high dividend-yielding stocks.

The third, wealth creation bucket, has a mix of equity mutual funds, direct stocks, gold, and real estate. This generates high returns so that Handa does not run out of money in later years. This can also ensure that something is left behind for the next generation.

“For somebody to retire early, one needs to have a combination of two things,” says Handa, adding that “They need to be in a high-paying job but should not like the job they’re in.” Handa also earns about ₹10,000 per month from content creation.

In Datta’s case, his financial advisor looks after his withdrawal strategy. Datta has an SWP to take care of his expenses. From time to time, his advisor tells him which funds to exit and where to stay invested. He has invested 75% of his corpus in equity mutual funds and PMS schemes and the remaining 25% in gilt funds. He also earns some money actively as a regular public speaker on the impact of geopolitics in financial markets. He is also a board member of Edelweiss Mutual Fund and Prudent Corporate.

Agarwal’s monthly expenses are taken care of from the interest and dividends he earns from his investments, a huge chunk of which (about 85%. See graphic) is in conservative fixed-income instruments like G-secs, bank deposits, and highly rated bonds.

This works for him as he has a huge corpus. He told Mint that in the case of a sudden emergency, he knows exactly which mutual fund or bonds to first exit from. He makes detailed calculations on what his next six month’s expenses will be. He also has a rough idea of where his money will go in the coming 3-4 years.

“I am very risk averse,” says Agarwal. “I have to ensure that my yearly expense is slightly less than what my interest and dividend income will be this year,” he adds. He trades in equity options with 10% of his corpus and has invested 5% in equity mutual funds.

Tangirala also manages to cover his monthly expenses using passive income—he has an apartment in Mumbai and a commercial property in Bangalore that are a source of steady income. Additionally, he has invested in dividend-yielding PSU stocks. This takes care of his monthly expenses even as the principal corpus amount remains untouched. He also works as a freelance consultant in a few projects and that helps him fund his vacations.