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Many of us aim to become financially free (or retire early). But not everyone is interested in it.
You too may not be considering early retirement. But it makes a lot of sense to prepare for it anyway.
Life isn’t fair (you know it) and is also unpredictable. It doesn’t always go the way we expect it too. And your actual retirement age may be much lower than your expected retirement age.
You never know when you might be forced out of job due to the availability of easily replaceable cheaper employees, technological disruption, a collapse of the industry you are part of, your inability to remain relevant to the profile, etc. Imagine your situation if after several years of work, you are ejected out of your role/company and unfortunately, are then too old to be considered for other roles. Or in other words, you are unemployable. That’s a tough situation to be in when not young.
And these are just some of the reasons. There can be several more. Job losses are a reality. Reasons can be many.
As the dynamics of employment across sector changes, most careers are becoming increasingly stressful. Who knows how long you can tolerate such stress levels? You may eventually consider taking early retirement due to high-stress levels in your job. That’s possible and is happening.
Leave stress. Other health ailments or serious injuries can also sideline your career abruptly.
And it is not just about you alone. A serious illness of parents, spouse or children may require (force) you to be actively involved in their treatment – which may make it difficult to continue your current job. You then have this difficult task of earning as well as taking care of them. At this point, you may have to either reduce your workload or even quit your job for some time.
In all the above cases, your ability to cope with the situation would be better if you have savings to fall back to. Pursuing financial independence or early retirement can reduce your hardships, atleast to some extent, if your working years are cut short for reasons outside your control.
Even if you don’t want to prepare for early retirement, you should prepare for involuntary early retirement.
This is like having a Plan-B to ensure that life doesn’t f*** you.
And even the mathematics of investing supports this idea. Saving early makes it easier to accumulate a larger portfolio as you move towards the traditional retirement age.
You may be young today and not want to retire before 60. But when you turn 50 and are fed up of your job, then having a large corpus will give you the option of calling it quits and relaxing for the rest of your life. And that’s a great option to have.
Preparing for early retirement acts as an advanced preparation for normal retirement. It fast-forwards your retirement savings. And this front-loading of retirement savings creates an insurmountable advantage due to compounding that you will thank yourself in later years for.
And failure isn’t a bad outcome here. Even if you fail to reach the right corpus for early retirement, you will still be better off than if you didn’t attempt to pursue it at all.
I know many of you feel that early retirement is not real and there is no point pursuing it. But it is real. Maybe you don’t want to retire early at this point in your life. But who knows you might change your mind after a few years. Life can surprise.
But I must tell you that planning to retire early requires planning, discipline, high savings rate and proper management of your investments. It’s not easy. But as explained earlier, it helps to have tons of money when life is planning to surprise you unexpectedly.
Life comes with uncertainty. But if you plan well, this uncertainty doesn’t necessarily have to result in insecurity.
So do think about it. And if you feel what I am saying makes sense, then start preparing for early retirement even if it is not your immediate goal.