YOUR GUIDE TO RETIRING YOUNG: SAVE EARLY, KEEP AT IT, GET SET, GO!

Fire doesn’t just mean the hot stuff now. For millennials and older Gen Zs who are fed up of clocking in to earn peanuts, it stands for Financial Independence, Retire Early. The term dates back to the 1992 book. Your Money or Your Life by Joseph R Dominguez and Vicki Robin. Today, it’s the war-cry for the burnt out, the exhausted, and the ones who are honestly, just not feeling it anymore.

The idea is to start early, save and invest smartly, so a person is financially stable by the time they hit their forties, and the built-up wealth makes money on itself. It’s also easier acronymised than done. No two people have the same financial journeys or define financial stability in the same way. Mumbai-based financial advisor Mayank Pahuja recommends making the most of what you inherit. This could be the little nest egg your folks cobbled together, an insurance policy set up when you were born, a Gringotts vault full of galleons, or simply a debt-free adulthood. Here’s how to make the best of the hand you’re dealt.

Today’s the day. To retire at 40, you can’t start at 39. Shruti Roy, 33, an advertising professional from Delhi, hopes to retire by age 45. “Forty-eight as a worst-case scenario.” She’s married, has a 10-month-old child, and puts away 50% of her salary into savings -- SIPs of mutual funds, stocks and exchange-traded funds. “I have been planning this since I was 29. Every six months, I have my portfolio looked at to ensure that my investments are doing well. I am trying to build a corpus of at least ₹2 crore, which is when I will withdraw a portion of it to live on and let compound interest do its magic on the rest.”

Frill seeking. Today’s spends eat into tomorrow’s dividends. So, order Starbucks, by all means, but rethink the third designer bag, the glam rental, the five-digit night-out bill and the VIP concert tickets. “Those starting their first jobs must allocate a portion of their salary to investment and be disciplined,” says finance professional Saurabh Sunder, 28. “If people can manage this in their 20s, then compound interest over 20 years can build a corpus that may give them a cushion for the future at 40.” Keep increasing the investments as the income grows.

Bumps ahead.Ranchi resident Vimal Singh, 56, was a banker until he retired 11 years ago. He spent his working years in Delhi and only moved back recently. “I have to admit, it’s more difficult to retire by 45 now than it was for someone like me,” he warns. He had a secure job all through, lived simply, invested early. He didn’t have to moonlight or take up a second job. “I garden and travel with my wife now. My son, a lawyer, lives in Mumbai. I have never had to ask him for help, and could even pay for his education after my retirement,” Singh says. His biggest tips: Get a smart financial advisor and make a habit of saving, especially in an economy as volatile as the one at present. “Make sure that your emergency fund is not invested in any risky instruments or stocks,” says Pahuja.

The fine print. Those who claim to live the dream often have safety nets they don’t reveal. Van-lifers who’ve quit their jobs to see the world live on hotpot noodles. The colleague who claims to have cleared her home loan at 35 may leave out the bit that the hefty down payment came from dad. Roy admits that she’s living out her early retirement dream because her husband shoulders most of the expenses. But she has had to make sacrifices. “Since I started investing late, I have to compensate for it with a frugal lifestyle. I am left with no money for eating out, going to the cinema, or buying new clothes or shoes,” she says.

Just in case. Mumbai-based financial advisor Mayank Pahuja says that when investors talk of high risks yielding high returns, they rarely address how to manage those risks. “Is a long-term investment the only solution? Not really,” he says. “Plan ways to exit early from a high-risk investment that isn’t working out, and move on.” Singh started investing at 27, five years after his first job. He believes that working life should be comfortable too. “It’s great to save for a rainy day, but the years you spend saving is when you’re young and have the mind and body to enjoy some of that wealth. Don’t deprive yourself of that joy.”

From HT Brunch, January 27, 2024

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