Retire by 40

The easiest way to prepare for early retirement is the Rule of 25. According to this rule, your retirement corpus should be 25 times your annual expenses today. For example, if your yearly expenditure is ₹8 lakh, then you need ₹2 crore (8 lakh x 25) to retire comfortably at 40.

To estimate your retirement corpus, you need to calculate your future expenses. These include your current monthly expenditures, inflation, and the number of years of retirement. This can be expressed as

Future expenses = current monthly expenses × inflation × years of retirement.

Include factors such as healthcare expenditure, life insurance, and taxation to calculate the required retirement corpus. You can consult a financial expert to set realistic goals and avoid emotionally driven investments.

Your financial planning for long-term goals should consist of investing early in life. This helps you benefit from compounding to grow wealth over the long run. Try to save as much money as possible and invest it for growth potential.

Additionally, the earlier you start saving and investing, the larger your corpus will be for financial security at retirement.

Better investment strategies lead to a larger retirement corpus. Diversifying your income through investments in equity mutual funds and ULIPs (Unit Linked Insurance Plans) can help you achieve risk-free returns.

Unit-linked insurance plans combine life insurance and market-linked investments to provide life cover and investment under a single plan.

Evaluate your expenses after 40 and set aside some savings for emergencies. Reduce unnecessary spending, such as frequent travel or leisure activities, and allocate more to contingency funds for emergencies. It will enable you to stay financially strong in unforeseen circumstances after retirement.

National Pension System, started by the Government of India, provides Social Security to the working class. It is one of the most risk-free investment options, as the central government backs it. It is open to employees in both the government and private sectors.

Under this scheme, employees contribute to their pension account at regular intervals during their working years. After retirement, they can withdraw a lump-sum amount from the corpus, while the remaining portion remains invested and paid to them as a monthly pension. Moreover, the NPS provides tax benefits under Section 80C of the Income Tax Act, 1961.

A ULIP plan for early retirement offers the dual benefit of insurance and investment. It provides you with life coverage, along with investments providing better returns and low-risk funds. It helps create long-term wealth, an essential aspect of retirement planning at an early age.

You can benefit from the compounding income to generate enough wealth to meet your post-retirement needs.