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How much do you need to retire early?

How much do you need to retire early?
As this question was tossed at me, I started relating this to the myriad conversations I have had on this topic. Let me narrate a few of them.
My classmate, a smart, well-read, MBA of class 1999 was engaging in this conversation. His spouse was next to him and so was mine. Needless to say, the trigger for this conversation was stress! He said that the job was so stressful that I wonder when would I be able to take it easy, be at peace, retired! His spouse chimed in – please tell him not to be a candle burning at both ends. He will disappear!
And then, walks in their 14-year-old asking when would she get her next iPad complaining about how slow her present one is! She did get a consolation by way of a bowl of potato wafers and a gentle pat from her mom saying, “My dear Captain Marvel, that iPad is not what you think that iPad is!” As we switch back to the big question, my buddy starts off again – if it were to look at replacing iPads, phones and our car every few years, I don’t think I am ever going to retire!
Few years ago, we were celebrating Diwali with our family friends. The special treatment of being a south Indian amidst a home full of lively north Indians gave me enough opportunities to not only stand out (literally and figuratively) but also to engage in conversations they always like to have with me – money matters! The grand old woman and man of the family would liberally open their purses to give Diwali gifts in well decorated, shining envelops and I must say, that is always a special feeling for us (beyond getting free money) as we feel part of the family and never like an outsider.
While the nonagenarians charmed us with their smile and the gifts and retired to their bedroom sharp at 9 pm, the next generation was hustled into a conversation by the siblings around – how can we be like our parents… at this age, they have all the energy, happiness and even money to spread liberally with all of us. What should we do to be like them? Is it to do with retirement planning? Ah… let us call Moorthy now and get him to answer these questions! As I heard the same thing from each of them, I had to ask them the all familiar series of Why? (Not once, but few times over).
Why do you want to retire? Ans: Because I have enough of this monotonous life!
Why do you call it monotonous? Ans: There is nothing interesting. It is the same old. Get up in the morning, get ready for work, get back in the evening, barely have time to do anything. Go to sleep and before you know, it is morning again! I just want to do nothing!
Why do you want to do nothing? Ans: Because I am tired. I am done. This is like a treadmill. I want to get off it!
Stop, rewind, play… the same things I hear again and again.
We had a bunch of youngistan landing in Mumbai from US and UK. College pals, just graduated a year ago... got jobs and are reuniting to celebrate a wedding. We had the privilege of taking all of them out for dinner before they set out for their destination wedding party in Goa. Two of them were speaking to me about FIRE. The famous Financial Independence, Retire Early. They were clear that friends having destination weddings isn’t how they would equate themselves to, and that they will be frugal as ever until they hit their 1 million USD! One of them went on the same lines but in a milder fashion educating me about slow FIRE! Phew… So, at least here I heard a number that connects with the question – how much?
Three stories. Multiple perspectives on retirement or the journey to retirement. So, is there a single number that we can get to, that shall take care of the answer in all these three cases? Clearly, the answer is a big NO. Each one of us will end up with our own versions of what our retirement would be, how do we plan to spend our life post-retirement, where do we plan to locate ourselves post-retirement, how long are we willing to keep working until we call it “I am now retiring”, what is the motive behind retirement (early, late or probably like everyone else), what changes to my lifestyle am I expecting during the retired years, how often will I be able to control myself from my urge to travel, holiday elsewhere and crave for that pub hopping over weekends… the list is endless!
So, now that there is enough reason to not answer the subject of this column, there are still a few key points that you shouldn’t run away from. That might help you get closer to your own answer of how much!!!
1. Do you want to live the same lifestyle you have today for the rest of your life? If so, whatever you end up spending on, keep a watch on the inflation in the future. You must prepare for that!
2. Do you have a list of things that you will categorize diligently into those that are essential to spend and those that are discretionary (ones you won’t die if you didn’t get them or spend on them)? If you can, how likely are you to be able to forsake the ones in the latter category?
3. Do you foresee increasing number of dependents in the future? If so, you need more money than today to take care of them and yourself too!
4. Have you resolved not to borrow as you near your planned retirement and thereafter? If not, then, you still aren’t prepared to hang your boots yet.
5. Finally, try a mock run of your retirement. Live that life for a week or two and see whether that is truly what you are seeking! Ask again - are you tired of doing what you are doing or are you tired of doing work itself?
Should give you a bunch of answers on how much, by when and why!!!
The author, Rajesh Krishnamoorthy, is Country Head, Financial Planning Standards Board at India India Liaison Office Ltd. The views expressed are personal
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