Careers have evolved in many ways over the last two decades – people no longer spend their entire careers in 2 or 3 companies. Along the same lines, many of us no longer aspire to work in full time roles until the traditional retirement age of 60. In the US, there has been the rise of the FIRE movement (FIRE is an acronym for Financial Independence, Retire Early) which stresses high savings rates to build a large corpus in your 30s or 40s. Being able to retire well before 60 takes a good degree of discipline and financial planning – it is not an endpoint, but the start of a different journey.
Suppose you do achieve this difficult goal, what does it mean for you? Do you move to Goa and sip margaritas on the beach till you are very old? Do you use this new freedom to pursue your passions? Or do you continue working in your job but with lower stress since you are financially set.
Even if you achieve your financial freedom as fast as possible, we do not think a fully retired life in your 40s is a good idea. Firstly, you may have 40+ years of post-retirement life in front of you, as life expectancy has increased in recent decades. If you have not planned any serious pursuits, it can turn out to be very boring! Working is more than just earning money; you have a purpose and a daily routine which keeps you motivated. Second, if you retire too early, you may be scared of running out of money even if you have planned your finances smartly. You may hesitate to spend your money even on smaller things like buying a new smartphone, causing you to compromise too much on lifestyle. Lastly, there is also a social component to life as a working professional – you may feel cut off from society if you’re the only one among your peer group who has retired early.
Instead of retiring full time from your work, moving to remote work or a more flexible schedule may free up your time for your passions outside work. Or you could take up part-time gigs to stay connected with the working world and find a more sustainable way to retire early. For example, say you have already accumulated 80% of the required retirement corpus by the age of 43, the rest can be done in 7 years by working part-time, rather than 3 years of full-time work.
Once you stop receiving income, good financial planning becomes very important. In addition to lowering the risk you take in your portfolio, you should automate & simplify your money life, and get adequate health insurance. It is worth getting help in the form of a qualified financial advisor or an app that provides financial guidance.
