Approach Retirement with a different construct

Aug 25, 2023

For those who believe an early retirement is some sort of nirvana, here is a question that they need to address. And use it as a compass to point them in the right direction.

What is it that you are retiring from, and retiring to?

Are you planning to quit working altogether and indulge in hobbies such as gardening, cooking, travel and volunteering for a cause you feel passionate about? You may opt for a partial retirement where you work as a consultant or opt for freelance projects.

Retirement is not a destination, and certainly not a “happily ever after” reality. And there is no 0ne-size-fits-all solution. You have to plan through it. Building up a retirement corpus is just one aspect. Figuring out your life and how you plan to spend your time is the other. It would be a shame if you attained the financial independence to enable an early retirement, only to be confronted by an existential crisis.

Be sure to ask yourself what it is that is driving you. If it is just dislike for your job and the lack of fulfilment, maybe a thoughtful career change would do the trick. If the long commute and city life are wearing you out, would you be open to relocating? The point I am making is not to assume that the only way out is an early retirement.

The moment you start from a different context, there will be a paradigm shift in your thinking.

  • Wrong goal: Retire early.
  • Correct goal: Financial independence.
  • Wrong question: At what age must I retire?
  • Correct question: What are the emotional, mental and physical issues pushing me to retirement?
  • Wrong target: What corpus size will be sufficient?
  • Correct target: What will be my source of income and cash flow when I retire, and will that enable me live the lifestyle I choose?

Evidently, there are interdependent factors at play. None of the above can be answered exclusive to the other. But this practical approach will throw light on what you perceive as financial independence. Your magic number may be Rs 3 crore, but for someone of the identical age and similar social status, it could be Rs 7 crore.

After all, financial independence is not just a number. It is not about having money to cover all your expenses. It is about psychological independence too. What is the corpus amount that will help you overcome your insecurity? What is the income that makes you feel taken care of?

It is tempting, but incorrect, to view financial independence as a pendulum swinging between two extremes - either you are, or not. View it as continuum. View it as a scalable project. With every single decision and every single paycheque, you are moving closer to financial freedom.

Even then you may go wrong. After all, these are all probabilities about the future.

Expenses change. It could well be that your lifestyle has been inching upwards and you need more than what your savings and investments provide for. Calculations could go awry; you assumed too low a rate of inflation and too high a return. A tragedy in the family could force you to dip into your corpus (that is why an Emergency Fund is so critical).

One or the other may force you to push back your dates or get back to work.

Keep upgrading your skills. Develop new ones. You need to have something to fall back on should you have to rejoin the workforce. Keep networking, even if it is low-keyed.

Nothing is written in stone.

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