· retirement · 3 min read
Early Retirement - Planning for Financial Independence
Discover the counterintuitive nature of retirement planning. Achieve financial independence with our comprehensive calculator.
Early retirement refers to the decision to cease regular employment and gain the freedom to pursue other activities, without the need for a traditional job. While individuals may still earn income through consulting or other means, this income is considered temporary and not included in the retirement plan. The goal of early retirement is to achieve financial independence, allowing individuals to work on their own terms.
The Counterintuitive Nature of Retirement Planning
Retirement planning can be counterintuitive, as many people may assume that retiring earlier requires a larger retirement corpus. However, the opposite is true. Planning for early retirement with a relatively “low” corpus can be more manageable than planning for a typical retirement with a “low” corpus.
Inputs for Retirement Planning Calculation
To kickstart your early retirement planning, consider the following inputs:
- Current Age: Your current age, e.g., 30
- Retirement Age: The age at which you aim to stop working, e.g., 55
- Life Expectancy: Estimated age at which you may live, e.g., 85
- Current Post-Tax Annual Income: Your current annual income after taxes, e.g., 12 lakh
- Current Annual Expenses: Your current annual expenses, which may be around 60% of your post-tax annual income, e.g., 7.1 lakh
- Salary Growth Rate: The rate at which your salary is expected to grow each year, e.g., 5%
- Expense Growth Rate: The inflation rate that determines how your expenses will grow each year, e.g., 6%
- Post-Retirement Return: The expected post-retirement return on your entire corpus after tax, e.g., 8%
- Investment Return: The expected post-tax return on your investments to achieve the retirement corpus by the retirement age, e.g., 10%
By considering these inputs and leveraging suitable retirement calculators, you can gain insights into the financial aspects of your early retirement plan. Remember, early retirement requires careful planning and a thorough understanding of your financial goals and resources.