Early retirement: This wealth expert feels you should not retire early but invest for financial freedom

In our traditional society, 60 years was the base retirement age. But with changing times, more individuals are challenging this age limit and opting for early retirement. Many experts have been encouraging the pursuit of financial independence, with the objective of achieving early retirement — commonly referred to as FIRE (Financial Independence, Retire Early). The goal is to attain this milestone significantly earlier than traditional timelines, potentially even in one’s 30s or even 40 years. This ambition necessitates substantial savings and considerable financial sacrifices.

This movement is far from being merely a whimsical trend. In fact, a couple of success stories in recent times coupled with a notable 67% increase in Indians proactively engaging in early retirement planning, as highlighted by a PGIM India Mutual Fund survey, underscore that early retirement is evolving into an attainable goal rather than a remote fantasy.

However, not all financial experts feel this is a viable option. In a recent podcast, Deepak Shenoy, Founder & CEO of Capitalmind, said: “The FIRE moment as they say, FI- Financial Independence is important, but I don’t know about retire early business. People don’t think it through all angles as they feel retirement means no working.”

It is to be noted that the term FIRE was first used in 1992 in the very popular book, Your Money or Your Life. The FIRE movement gained prominence because of its tantalising promise of “freedom and autonomy”. 

Talking about saving early and retiring early, Shenoy said one should save 30 times of their annual income and take that as FIRE goal. “In general, 30 times your annual expenses should be your goal before your age of 50. This savings can take you to the age of 90. This should not include the child’s expenses. For example, if you are spending Rs 10 lakhs a year, the Rs 3 crore is enough for you,” Shenoy said.

The FIRE movement

The FIRE movement has three fundamental pillars. 

> Save 50-70% of your income
> Live frugally
> Invest wisely, preferably in a low-cost index fund

Some key steps to achieve financial freedom

1. Begin the journey to financial independence by assessing your current financial situation. This evaluation is crucial in setting goals and devising a plan to achieve them.

2. Achieving financial freedom requires setting clear and adaptable goals. Beyond saving for emergencies, one should consider investing in salary protection plans for added financial security during job loss or disability.

3. To achieve financial independence, investors must manage their debts wisely. Essential loans like home or car loans can be paid off with EMIs. Finding the balance between debt repayment and investing in assets is crucial for financial freedom in India. Consulting a financial professional is recommended.

4. Achieving financial freedom in India requires prioritising paying yourself first. This involves saving for the future before spending on present needs. Developing sound financial habits and investing in secure options for passive income and long-term growth are crucial steps towards this goal.

5. Adopting a frugal lifestyle is an essential step towards attaining financial independence. However, it should not entail compromising on fundamental needs such as nutrition or health insurance. Rather, it involves meticulously monitoring expenditure to prevent unnecessary overspending while maintaining a sustainable standard of living.

6. Generating various passive income streams is vital for achieving financial freedom early on. This strategy benefits your future self, emphasizing the importance of a diverse investment portfolio to secure passive income.