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How should I proceed to retire early?

Aim to accumulate enough by investing in a mix of equity and fixed income, advises Dhirendra Kumar

I am 35 years old and plan to retire early by 45 or 50. How should I proceed?
- Rohit

Just do an estimation of how much money you will need every month to make a living with dignity. This will help you figure out your income requirement in a year's time. Make sure that you have enough capital that can help you withdraw at least 4 per cent, as this should be sufficient to meet your expenses. Having a little more will give you a greater cushion. So, assuming that you need something like Rs 6 lakh a year to retire and if you are able to build a corpus of something like Rs 1 crore, it'll be fine. So, this is the simple formula that you should follow.

Aim to accumulate that Rs 1 crore in a mix of equity and fixed income. The debt component (up to 30-40 per cent) could be scaled up with a combination of fixed income products like your PPF, if you have a Senior Citizen Saving Scheme (SCSS) and then, fixed-income funds. The remaining can be invested in equity.
The general understanding is that when you retire, you become risk-averse and you should not be in equity but that is not true. If you retire at 45 or 50, then you have to plan for the next 30-35 years of living which will be supported by your income from your investment and for that, your investment must be able to beat inflation. And therefore, you must have a reasonable or sizable equity component even during retirement. So, that's the plan that you should implement.

I would like to mention that I have used Rs 1 crore just for an illustrative reason and also for the ease of mental calculation.

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