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.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
- 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?
- 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.
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:
- Normal retirement: I am 30 and wish to retire by 50; how should I plan my investments?
- Early retirement: How much do I need to retire by 45 in India?
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.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr 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.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)