Retirement Planning: There are very few people who can plan for early retirement. Early retirement means retiring before the age of 60. For this, you have to invest a lot during your job, only then you can retire early. If you also want to retire early, then you should do retirement planning under the FIRE (Financial Independence, Retire Early) model.
Where did the FIRE model start?
The FIRE model was started in 1992 with the book Your Money or Your Life by Vicki Robin and Joe Dominguez. Under the FIRE model, you can decide your retirement age yourself. However, if you adopt this model, then you will have to make a special strategy and may have to put up to 70 percent of your salary in savings.
Calculate your FIRE number
Finding out the FIRE number means knowing at what age you want to retire. For this, you will have to do the calculation keeping in mind your salary, your expenses, your lifestyle and your lifestyle after retirement. If you are not able to do the calculation yourself, then you can also take the help of a financial planner.
Increase savings and reduce expenses
Under this model, it is most important that the savings are as much as possible. Under this, you will not only have to control your expenses, but also try to reduce them. The more you invest, the sooner it will help you retire and the higher the pension on retirement will be.
Focus on increasing income
If you do a job with a high salary then it is fine, otherwise you will have to focus on increasing your salary as well. You will have to look for a job that pays a high salary. If you are not able to get a job with a high salary then you will have to try to do some part-time or freelancing work, so that you can earn some extra income. This extra income will benefit you in that you will be able to invest more and more money.
Where to invest money?
While investing money, you will have to take some risk. Try to invest in many types of tools. For example, you can invest about half of your investment in the stock market or mutual funds. You can buy a property on rent with some part, which will keep bringing money for years. You can also get a good return on land by buying it. You can also invest some money in tools like PPF.
Understand with an example
First of all, let’s assume some benchmarks. Suppose you are 25 years old and your salary is around 40 thousand rupees and you live a very simple life. Let’s assume that you spend 25 thousand rupees every month on rent, ration, travel, entertainment, health insurance, life insurance etc. If you invest money by taking a little risk, then you can get an average return of about 12 percent from mutual funds. On the other hand, if you invest in PPF and assume that the interest rates will not change, then you will get a return of about 7.1 percent. It is expected that by investing in property, you will get an average return of 12 percent in the long term. In such a situation, by investing in different places, you will get an average return of 10 percent.
Keep increasing the saving amount by 10 percent every year
Now let’s assume that you invest 50% of your total savings in mutual funds and 25% each in PPF and property. The question here is how much money should you invest? To know how much money to invest, you need to know how much money you will need at retirement. Let’s assume that your salary will increase at an average rate of 10% per annum in the long term. In such a situation, not only will your expenses increase every year, you will also have to increase your savings by 10%.
How to retire at the age of 50
If you want to retire at the age of 50 and your current expenditure is Rs 25,000, then you will need about Rs 80,000 at that time, that is, you will have to make your corpus of about Rs 2 crore. For this, you will have to invest about Rs 6,000 every month and increase it by 10 percent every year. In this way, you will have a corpus of about Rs 2 crore at the age of 50.
Think about the additional 10 years as well
One thing to keep in mind here is that if you are retiring early then you have to think about 50-60 i.e. additional 10 years. In such a situation, if you are planning retirement for 50 years, then you have to keep in mind the next 10 years as well. With an increase of 10 percent every year, your monthly savings at the age of 50 will be around Rs 65 thousand.
Understand further calculations like this
If we assume that you need an investment amount of 10% growth for 10 years, then it comes to around 2 crore rupees. That means you have to invest in such a way till the age of 50 that a total corpus of 4-5 crore rupees is formed. In such a situation, you have to start investing with around 15,000 rupees by increasing it by 10% every year and at the age of 50, you will have a corpus of 5 crore rupees. If you also get 7% interest on this, then you will start getting 35 lakh rupees every year i.e. around 3 lakh rupees every month as pension.
