Is it wise to retire early in my 40s if my portfolio is sufficient?

Published: April 26, 2022 at 6:00 am

A reader asks in response to our recent article – How to beat inflation after retirement along with guaranteed pension – “Is it wise to retire early in my 40s if my portfolio is sufficient?” There is more to retirement planning than determining if the corpus is large enough to handle inflation!

Financial independence and therefore the ability to retire early is not an end. It is the means to consider options from a position of comfort and security.  Therfore any wanting to quit salaried existence early must have a clear roadmap of what they are going to do.

Statements like “I will travel around the world”; “I will read and sleep all day” are short-sighted fantasies. Even “I will engage in social service” is not pragmatic. It can earn you a lot of “likes” on social media but too much of anything is not desirable.

Nothing stops us from travelling/reading/sleeping/aiding when we are employed. If we are unable to strike some sort of “balance” before retirement, I will not place any bets that we can change after retirement.

Here are some questions that every FIRE (financial independence and early retirement) aspirant must consider well before their corpus is robust enough.

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  1. Why am I seeking early retirement? Is it because I hate my job or because it is stressful? Can I not consider a job change or career change or strive towards a better work-life balance to decrease my frustration? See: Are we seeking work-life balance in the name of early retirement?
  2. What will I do after quitting? How will I spend my time day after day after day?

Early retirement and even normal retirement should be seen as a transition. A change from working for someone else to working for ourselves. So for the most part of our time, we still “work”. Just that we can pick and choose what to do and whom to work with. We can pace ourselves at will without sacrificing family needs.

Unless we have a rock-solid self-driven alternative income source set up based on the skills learned so far, early retirement is not prudent. This income 2.0 need not be as high as the last salaried income drawn. We can strive to build it over time. Being gainfully employed is one of the best ways to pass the time! See Passive Income Template: Steps to build a lifelong income.

Working for ourselves after retirement illustration
Working for ourselves after retirement illustration

Many ask us to consider the earning opportunity lost by retiring early. This is certainly important but the mental and physical stress associated with that earning should also be considered. This is why planning for income 2.0 as early as possible is crucial.

I have a large corpus but I do not have income 2.0 planned. Can I quit and then work on it? This is not advisable. It is better to wait until a solid plan is in place before quitting.

Is income 2.0 also applicable for normal retirement? Yes! Productive time management is crucial for mental and physical health. Also, the gap between early retirement and normal retirement has shrunk today so a new income source is crucial. See: How to prepare for the “new normal” in retirement planning.

But I have rental income and dividend income as alternative sources! That is great but this does not constitute gainful employment. Income 2.0 should be from the time and effort we put in. Hard work is the best distraction and therapy to stay away from the devil’s workshop.

“It has been my experience that one cannot, in any shape or form, depend on human relations for lasting reward. It is only work that truly satisfies.” – Bette Davis

So to answer the question, “Is it wise to retire early in my 40s if my portfolio is sufficient?”

Assuming the corpus is indeed robust and sufficient, see examples here:

you can quit your regular job only if you have a clear time management plan with a good chunk of it used for gainful employment.

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Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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