When To Retire?

Retirement, according to the dictionary meaning is to “withdraw from one’s position or occupation or from active working life.” You can achieve retirement when you have sources of income that do not have to be earned by working.

In fact, there’s no correct age to retire. The decision to retire depends on factors like:

??Your lifestyle goals

??Financial capability to sustain the lifestyle until your & spouse’s death

In order to retire comfortably, experts suggest that we need 20* our annual average household expenses plus funds require fulfilling our wish list.

The official age of retirement for those working as employee is 58-60 (lower in the private sector); however, nowadays many successful people opt to retire early to make the most of the new opportunities life offers.

How does one decide the right time to hang up one’s boots? These are the points to consider about retirement:

1.??????Attaining the legal age of retirement like 58 or 60 if you are working in corporate or government jobs. As regards business person, your son/daughter has succeeded in your business and they do not require your presence.

2.??????Attaining life Goals, Needs: Self- actualization theory relates to the achievement of one’s highest potential. According to Abraham Maslow, developer of the self- actualization theory, there are 4 basic human needs - physiological, safety, love and belongingness and self-esteem. Once a person achieves these, he/she aims for the realization of the best that he/she can be, do and have.

3.??????Financial Safety & security: To retire comfortably, you need to have enough Retirement Corpus also called as net worth. From this Corpus, you should have multiple stream of Inflow, income regularly like Interest, Pension, Annuity, Rental etc. to support your post retirement needs. It’s obvious that you should have closed all loan liability by then and there is no loan liability outstanding.

4.??????Achieving Career Goals: You would have set certain career goal or milestone at various point of your career and once you have reached that milestone then that’s the time. Having achieved your desired goals in terms of climbing the corporate ladder, you may want to explore other opportunities, either as a consultant or mentor by utilising your expertise and wealth of knowledge & experience that you would have acquired.

5.??????Achieving Family Goals: ?If your children have grown up, settled in their family life & career and are financially independent, you can consider retiring if all other goals are also achieved. To elaborate further, your children should have completed their education and are married (particularly daughter/s) and settled in their life and career path.

What is the correct age to retire?

Given the healthy life styles,?rising life expectancy has increased in India to average 70.8 years in 2019 (with a range of 67-77 in different parts of India), people’s attitude towards age have undergone a complete change. More and more people are actively choosing to work in their 60s and extend their career to 65 or 70 in some cases. This means that after formal retirement in Job, they continue with same Company or Group as Consultant or Advisor as most corporates wish to utilise their wealth of knowledge & expertise for some more time as long as their health permits. Many highly talented people would like to start their own consultancy or get associated with other boutique firms as Consultant, whether part time or full time or for specific assignment. Many may advise MSMEs in their areas as part time or assignment based Consultancy. Thus many people are looking at phased retirement based on their health. This may result in larger Corpus to retire. Who wouldn’t prefer a gradual transition from being ‘very busy’ one day and ‘bored and isolated’ the next? From an emotional standpoint therefore, the trade-off has to be evaluated between continue working professionally and the joy of leading a life of leisure. Clearly, family, attitude, finances and lifestyle are all significant factors in early retirement, timely retirement or late retirement. Many people are facing concerns from attitude of family members treating them as “Waste Paper Basket” and thus they may like to prolong their career as long as their health permits even though financially they are secured.

Despite all the planning that they would done, there may be risks of events happening like physical disability, costly medical emergency, a sudden turn of events 9in the family) that requires huge funds outliving their assets. Hence person should be mindful of these probabilities and have a ‘plan B’ ready to take care of such unexpected events like huge medical costs required to be incurred during Corona period by many families.

India may increase the retirement age

The current retirement age in India is 60 years. Globally, especially in the west, considerations of revising the retirement age have made significant strides in the recent past. The UK, for example, is already planning to increase the retirement age from 65 to 68 years over the next two decades. In India, it was the Economic Survey Report 2018-19 that first floated the idea of revising the retirement age, given the likely slowdown in its population growth, increase in the senior population, and growing life expectancy. Increasing the retirement age in a gradual manner will play a key role in ensuring the viability of pension systems and in reducing the financial burden on the national exchequer. Additionally, as the Economic Survey argues, it will increase female labour force participation in the older age groups. Further, an increase in retirement age will greatly support skilled and qualified seniors to remain active, while continuing to contribute to national growth.

What are the rules of Retirement?

??Focus on your spending and not on your earning as you have control over your spending whereas, earnings are dependent on dynamics of demand & supply and market conditions.

??Invest in long term investment products to avoid interest rate volatility

??Prepare for inflation, as we are living in uncertain times

??Never stop working as retirement plan can never be ‘one size fits all.’

??Retirement planning should begin the day you start earning

Early Retirement

Retire rich & early is the new buzz word amongst millennium generation. It’s a question that depends on your personal needs and circumstances, not to mention your personality and plans for what you'd do instead. Most of the people are not happy with routine 9-5 jobs these days. Be it a single man or single woman, or a family person, regular jobs are not something they want to be engaged in till the age of retirement. They are confused about how to plan for early retirement. The biggest hurdle that comes in the way of early retirement planning is money. However, with a little planning and following a financial discipline, one can realise the dream of retiring early.

However, the research shows that working longer keeps you healthier and happier but there's also evidence for the opposing view. Hence you have to balance it. The National Bureau of Economic Research, for example, found that "retirement improves both health and life satisfaction," in part by factoring in the number of people who are forced to retire due to health issues.

We all have had our bad days when we're prepared to hand our resignation letter and lead the good life of a retiree. Or we want to pursue our passion like photography, backpacking, music, social work, farming, pilgrimage, return back to home town and spend time with nature etc. Hence think through and consult your best friend before quitting as reasons for quitting could be bad boss or his behaviour but that way in life we have to deal with all kinds of people whether we are working or retired.

While leaving the workforce early might sound like paradise, it can be a big mistake if you're not financially ready to live without a pay-check. Experiences suggest only few people have the financial resources to support an extended retirement

Busy In Retirement

Instead of doing nothing in retirement, you might find yourself as busy as ever. The beauty of early retirement is that you get to focus all your energy doing what you truly want to do. The only restraint is your energy and time. Life doesn’t end once you retire. It simply morphs. You can do a lot of fun and productive things after you leave work. Don’t think about retirement in the traditional sense. Think about retirement as a new adventure once working for money and status is over. To minimize regret and maximize happiness, work on doing things you want to do every day. It is much more likely you will regret forsaking time for money than forsaking money for time.

https://www.wealthnestate.com/post/when-to-retire

CA Harshad Shah, [email protected]