The subject of this blog is one of most common subjects being discussed in the financial plan meetings that I have with my clients. The goal of retiring early, in a lot of cases as early as 40 is the new normal and is gender and work agnostic. From professionals to salaried to self-employed, everyone wants to be financially independent as early as possible and are raring to go with whatever it takes.

Retiring early means you have less number of years in work life to plan and provide for more number of years in retired life. A situation like this is of course challenging and slightly difficult too but as a goal, it still stands achievable provided a check list is adhered to very closely and tightly.

Important points to remember –

  1. Identify the goal early on – Ideally, when you start working, being able to define your retirement age and having a separate savings plan earmarked for it makes sense. You can’t plan for retirement at 40 when you are 35 as this leaves you with very limited options and higher probability of any kind of planning to fail to deliver the desired results.
  2. Allocate a larger percentage of savings towards retirement or follow an increasing savings / investment plan where the savings / investment rate increases at a set percentage year on year – Committed savings plan increasing at a set rate will improve the chances of realizing the goal in a more efficient manner.
  3. Follow a robust Asset Allocation strategy in line with the goal term – Following a disciplined savings approach is good but it is an appropriate asset allocation that can do the trick of making returns in line with the expectations set. If the retirement is due in more than 7-10 years, a growth oriented asset allocation can help in compounding wealth at a faster rate and building a corpus as required for retirement.
  4. Review of the Investment Plan for gap analysis and action – Financial space is ever changing and the investment world is even more dynamic. Regular review of one's investments thus gains much prominence. A quarterly portfolio review and an annual review of the investment plan dedicated to the retirement funding goal can help one stay on track and realize this goal well.

Gap Analysis, which is the difference between 'what you need' and 'what you have' has to be evaluated in greater detail and worked upon diligently. Very simply put, if you expected a portfolio return of 15% but your investments at the end of the year have earned you 10%, the 5% remains a gap that needs to be bridged by saving more so that one remains on track with respect to their goal funding. In absence of this review and tracking, the whole retirement goal plan could fall flat. It is thus pertinent for one to realize, understand and act upon this in due course of time so that the 'retiring at 40' goal becomes achievable and the whole planning exercise doesn't go futile.