BackPlanning to retire at 42
With the help of a financial planner, Abhinav is now working his way towards his dream of retiring early to pursue his passions.
Premium
Like many young professionals, saving and investing were not high on Ankit Abhinav’s list of priorities when he started working in 2012. The 29-year-old products operation manager spent most of his earning and used credit cards liberally, which left him with very little in hand after all the bills were paid.
On his parent’s insistence, he put small amounts away in fixed and recurring deposits and bought a life insurance policy for tax savings. There was no structure to the way he saved, and his investments yielded very low returns. His biggest mistake, perhaps, was he had no idea that insurance and savings don’t mix.
Wake up call
Four years after Abhinav started his job, his brother-in-law Kshitij Ranjan, who dabbled in investment planning through social media groups, introduced him to asset allocation and goal-based investing. He used an online calculator to show Abhinav that he would need close to ₹ 2.5 lakh per month to maintain his current lifestyle after retirement. This really shook him up, since he had thought his provident fund would be enough. This was the wake-up call he needed.
The same year, in 2016, he consulted a financial planner. “I realised that I needed an authorised professional to help me plan my finances when it came to deciding where to invest and how," said Abhinav.
He decided to go with a fee-only financial advisor because he figured this would eliminate any bias or conflict of interest. That’s when he got in touch with financial planner Piyush Khatri, founder, Sahastha Financial Consultants.
Being a young professional himself, Khatri was well-versed with the issues his largely millennial clientele faced when it came to investing. Abhinav was more than happy to let him take charge of his finances.
Chalking a path
The first thing he was asked was what his primary goal was. Although Abhinav loves his job, he has always believed that working should be a choice, so his primary goal is to retire at 40. He wanted to retire to the mountains to meditate and take up teaching underprivileged children.
Khatri quizzed him about his risk appetite, crunched the numbers and gave Abhinav both good and bad news. The bad news was that he wouldn’t be able to retire at 40. The good news was that he could retire at 42. He was already 27, so he had to start immediately to make the most of his remaining work life.
Since he had a medium-high risk appetite, he was given a 75:25 investment plan. He was to put 25% of his investments in debt instruments like PPF and EPF, and the remaining 75% in equity. With this plan in place, even with a reasonably conservative interest rate of 10-11%, Abhinav would be able to build a large enough corpus in the next 15 years, so that he could retire at 42. Khatri approached Abhinav’s portfolio with tactical asset allocation to keep it balanced and profitable. “He had no proper asset allocation. He was investing in products, not a strategy. I told him what to invest in and in what proportion," he said.
Khatri also recommended Abhinav to have adequate health and life insurance. “Young people tend to rely entirely on corporate health insurance, but what they don’t realise is that if they wait an extra five years to buy an independent plan, their health might deteriorate and make it difficult for them to get insurance," said Khatri. “My expenditures were cut down significantly, and while it has curbed my freedom to go shopping whenever I want or buy the latest gadget, I am happy to make the sacrifice in favour of an early retirement," said Abhinav.
With Khatri’s help, Abhinav is now working his way towards his dream of retiring early to pursue his passions.
************
Mistakes I won’t repeat
1. Mistaking insurance for investment
2. Waiting too long to start investing
3. Keeping money in fixed deposits
4. Not planning for retirement
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
