Written by – Jaya pathak
Retirement at 50 is an ambitious yet achievable goal, provided they planned meticulously and start early. With rising inflation and life expectancy, early retirement requires a robust financial strategy. Early retirement is gaining popularity among Indian professionals. However, if you want to retire earlier than the traditional age of 60 that means your retirement corpus must sustain you for a longer time, possibly 30-40 years.
So, if you are currently 40 and want to retire at 50, you must make a strategy. In this blog, we will discuss how much you should ideally be earning saving and investing in order to make your dream a reality.
Understanding early retirement in India
Early retirement is often associated with the Financial Independence, Retire Early (FIRE) movement. It emphasizes savings and investment in order to achieve financial freedom before the traditional retirement age. In India, where social security systems are quite limited, individuals must rely heavily on personal savings and investments to secure their retirement.
You can start by estimating your expected annual expenses during retirement. There are various factors and costs such as housing, healthcare, traveling and daily living. You will need about 70 to 80% of your pre retirement income to maintain a similar lifestyle.
Estimating the retirement corpus
The 25x rule
You can utilize the 25 times rule. This rule suggests that you need 25 times your annual retirement expenses saved by the time you retire. For example, if your annual expenses are projected to be 18,00,000 then you will need rupees 4.5 crores saved.
Growth of current savings
You can assess your current savings and their potential growth that compound interest period you can consider for conservative investment returns for about 4 to 6% post inflation for a balanced portfolio. That compound interest. You can consider for conservative investment returns for about 4 to 6% post inflation for a balanced portfolio.
Income requirements at 40
 If you want to retire by 50, you must determine how much you need to earn starting at age 40.
 Savings rate
You must aim to save at least 40 to 50% of your annual income. It is quite higher than the conventional 50 to 20% savings rate but it is quite essential for your early retirement.
For example:
Suppose that you have an annual living expenses of rupees 18,00,000. Your desired retirement savings is rupees 4.5 crores. Your current saving is rupees 1,00,00,000. The annual return rate is 5% and years to retirement is 10. Then you will need to save approximately rupees 24,00,000 per year, with an annual income of at least 48 to ₹60,00,000 to achieve a 40 to 50% savings rate.
Investment strategies
- Diversifying your portfolio: A well diversified portfolio can help to balance the risk and returns. You can consider allocating your investment across equities for higher returns over the long term. There are various debt instruments such as PPF, EPF and NPS for stable returns. Real estate is available for rental income and capital appreciation. Mutual funds are for both equity and debt funds for diversification.
- Tax efficient investments: You can make the most of retirement accounts like EPFand PPF for their tax advantages. Public Provident Fund offers tax free returns and is backed by the government, whereas Employees Provident Fund is mandatory for salaried employees with employer contributions. The National Pension Scheme provides an additional tax benefits under section 80 CCD(1B).
- Asset allocation: As your retirement is near then you can consider shifting towards more conservative investments to protect your savings from market volatility.
Additional Income Sources
- You can develop passive income by investing in rental properties come on dividend paying stocks or starting a side business. It can help you to generate income with minimal daily involvement.
- Some early retirees often opt for part time work so that they can cover a portion of their expenses which contribute to reducing the amount needed from savings.
Lifestyle and adjustments
You can reduce your living costs which can significantly decrease the amount you need to save.  Cut down the non essential expenses. You can consider relocating to areas with lower living expenses, housing costs and taxes. You can also review your spending habits to identify the possible reductions which won’t significantly affect your quality of life. You can also aim to be debt free by the age of 45 to reduce the financial obligations.
Monitoring and adjusting your plan
 You must regularly review your financial plan so that you can ensure that you are on the track. You can assess your savings, investments and expenses annually. You must ensure that your retirement corpus accounts for rising costs. You can also insert financial advisors to optimize your investment strategy.
 Conclusion
Retirement at 50 is a challenging yet attainable goal. By the age of 40, you must have a significant income. By understanding your retirement needs, you can maximize your savings rate, invest wisely and adjust your lifestyle which will help you to establish a feasible path towards early retirement. It is quite crucial to regularly review and adapt your plan to ensure that you remain on the track to meet your financial objectives.
