Outlook Money
The concept of financial independence, or the Retire Early strategy or FIRE, has attracted many people who dream of early retirement from work or before the age of 60. While achieving it might seem difficult because of rising costs, aspirations, and income uncertainties etc, it is not but completely beyond reach.
The strategy of FIRE is to call for saving and investing early in life. This method can involve saving 50-70 per cent of earnings and following an investment plan in high-return assets like equities.
The main aim of FIRE is to save and invest enough funds so that one earns a considerable passive income without requiring full-time work for the rest of life.
The adoption of the strategy in India depends on several factors.
1. Saving Rate: One must save an enormous portion of his/her earnings. Considering the living costs in cities, many Indians face difficulty saving 50 per cent or more. It is however possible if one categorizes one's needs better than wants and avoids unnecessary expenses.
Equities, mutual funds, real estate, etc., offer good returns. One can increase wealth creation by investing in long-term high-return instruments like equities.
A retirement plan should aim for inflation-adjusted returns. For this, the plan must ensure the savings and returns outlast the life span.
One of the most ignored issues about early retirement in India is health care costs. Health insurance, including critical illness coverage, is necessary to avoid large medical bills which can dent your savings. It is essential for most individuals and especially for FIRE aspirants.
FIRE strategy calls for strict financial discipline. Saving a high percentage of income is not easy, especially when one has family responsibilities or is tempted to spend extra money.
Compiled by Syed Muskan