What does early retirement mean for you?
Any financial plan towards Early Retirement should have 3 components
- A retirement date
- A retirement stash – or your ‘enough number’ as Mrs.ONL calls it
- A financial plan to achieve the above
Early Retirement Date
Our early retirement date is 2027. The plan is for both of us to retire together. I will be 45 by then and would have spent 21 years working by then. The Mrs. will be 42 and would have spent 18 years working.
Our Retirement Stash
We do not yet have a final number. This is due to a number of factors. With our retirement date 10 years away sometimes I feel like there are a lot of variables. I am not able to confirm my possible scenarios yet. The other but more important part is that as we read blogs of people who are achieving or progressing towards FIRE, we learn a lot. In a good way.
For now we have an approximate idea of what we want. Unfortunately I will not be sharing any numbers here. I believe that sharing the thought process is more important. A number can be and is very different for each individual, but I believe the thought process can help immensely.
We have not decided where we will be retiring too. But, we will not be renting after we retire. We plan to buy or build our own home. We are yet to finalize the details of the house. The place of retirement and the size of the house are huge gaps in this part of the plan. Something we need to discuss and decide soon.
We have an approximate number in mind based on back of the envelope calculations. But this is something I am not comfortable yet. We have to work out possible risks – market crash, health issues – to ensure we are covered for these. At the very least we should have some contingency plans.
What we need to work on
- We need to improve our plan for healthcare and children education
- We need to plan how our stash will generate income after retirement – asset allocation – and how we will liquidate it to meet our expenses
The Financial Plan
Our plan is also split into 2 parts to meet the 2 goals of our retirement stash.
- We will be investing in real estate – possible apartments or land – to act as a hedge against real estate prices. The investment amount will be the current value of our future home. It is very difficult to guess how fast/slow real estate will grow, especially considering the last couple of years. But we have worked around this by estimating what a similar house is worth now and investing equal to that.
- We will save at least 70% of our income – we are around that if we include our performance linked bonuses. This will be invested in stocks, equity mutual funds, PF & PPF (or similar options). The asset allocation we are planning is to have 80% in Equities and 20% in PF+PPF. The focus of the equity portfolio will be purely compounding the value and not dividends. So we will be investing in growth focused stocks or mutual funds.
The advantages we have are
- We have no debt. Our education was paid for by our parents. We do not own a home and our car was bought for cash.
- We make above average salaries. This helps us meet our savings target even though we live in Mumbai.
- We do not have any other financial obligations that take priority over this plan.
Read these for more details:
- Retirement date & open questions
- Planning where to live & expenses after retirement
- Asset Allocation & Investment Plan