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Mumbai-based Abhishek Gupta is a self-taught wildlife photographer by passion, though his day job involves being a senior IT consultant at a MNC, with long hours and little time for safaris. Like many others, practical concerns made Gupta choose a more stable profession, although the 26-year-old insists that, in his case, it is only the means to an end: “My goal is to photograph every migratory bird species visiting India. That’s a long and widespread list which requires serious planning, patience, equipment, and, time. It’s only once I retire properly that I can travel for 3–4 months at a stretch and plan shoots across seasons." An attractive arrangement, no doubt, but with one catch: Gupta doesn’t want to wait till he’s in his 60s. “I need to be fit enough to trek, cross streams, and walk for long periods. I’m looking at retiring latest by 45." He also hopes to publish a book of his photographs and start a bird conservation center in his hometown, Baroda.

Similar dreams resonate with many urban professionals today, who are happy to retire from corporate jobs early enough to do their own thing. Despite commanding higher salaries than earlier generations, only a modest percentage of young earners envisage working into their 60s. Part of this can be attributed to the high stress levels, demanding hours, and constant flux of the modern workplace. No one can blame you for wanting to change gears and reinvent your life at 40, while you’re still young enough to enjoy it.

Know where you stand

As a hypothetical example, let’s consider that Gupta will live up to 75, and that his current expenses are projected at 4.8L p.a with no savings yet. Assuming a modest inflation rate of 5%, post-tax returns at 5%, and his preferred retirement age of 45, he would need a corpus of approximately 1,96,67,477 at retirement. For that, he must invest roughly 52,500 every month from his current age (26) to fund his dreams at 45! And that’s without considering dependants, debts, or emergencies.

If the numbers are making you reel, you’re not alone. As per a survey conducted in 2015 by Ipsos MORI, 47 per cent of working people in India have not started saving for their future, or have stopped or faced difficulties while saving. The good news is that it’s not impossible. With the right plan, you can indeed dream of typing up that resignation in twenty years or less, and live comfortably off the income from investment schemes.

Start saving yesterday

Financial experts recommend saving anywhere between 30–40% in your 20s for investment and growth; but, for retiring earlier, you need to raise this as high as you can. The good thing is that your responsibilities are far lower at 22–23, and you can build up a decent saving habit by the time you get married or have additional dependants. Financial freedom also mean being debt-free, so all EMIs, personal loans, and other debts should systematically be paid off by the time you retire.

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Photo: Pixabay

Make compounding your friend

Here’s another way an early start gives a massive advantage. Say, at 23, you start a monthly investment of 5,000 rupees in a 25-year-plan. Meanwhile, your colleague opts for a 15-year plan at 33, where he invests Rs. 8,000 every month. Let’s also assume that the post-tax annual rate of return earned on both investments is 8%. As per this calculator, when you turn 48 your investment will be worth Rs. 45,70,611. As for your colleague, despite paying a higher premium each month, his total value at 48, will be Rs. 27,17,059. Despite investing a smaller amount each month, you gain an advantage of almost 19 lakhs when your term matures.

Divide and rule

Depending on the financial situation in your 20s, 30, and early 40s, you can opt for different investing instruments with varied degrees of risks, returns, and protection. Investments can be allocated between low-risk, tax-saving instruments such as life insurance, pension and annuity plans, bank deposits, and PPFs, and high-return market-linked instruments such as ULIPs, ELSS, and mutual funds.

To simplify matters, most of these plans can be availed online. For instance, the HDFC Life Click 2 Retire – ULIP is an online Unit Linked Pension plan that offers market-linked returns, with minimal charges. This not only gives you an assured sum on maturity, but the profit from market gains helps to grow your wealth.

Pick the right retirement plans

Finally, it wouldn’t make sense to receive an enormous lump sum at 45, only to spend it irresponsibly by 60; so, plan your map carefully keeping sufficient intervals between policies and their maturity periods. It’s also important to remember that not all available pension plans allow access to your corpus before a certain age (commonly 55–75 years), also known as the vesting age. If you’re looking to retire in your 40s, opt for policies that have flexible and lower vesting age, such as the HDFC Life Click2Retire plan, which lets you claim your annuity payments at 45. In addition, it also offers flexible term payment policies of 10, 15 and 35 years, and additionally gives you the option of postponing the vesting age should the need arise.

Here is an easy way to calculate how much premium you have to pay each month based on the corpus you need for retiring at 45.

There’s no denying that retirement planning requires serious thought, with early retirement adding more years to account and plan for. But, when you consider what’s at stake — financial freedom and time for yourself, your family, and your dreams — it won’t seem like such hardship after all.

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