Investment

How to Retire Early with Mutual Funds Investment?

Do you plan to work forever? Or do you wish to retire early and pursue your hobbies? Will there be enough of Vitamin ‘M’ (or cash flow) to cover your desired lifestyle post retirement? You can retire early and have a lifestyle you wish for with proper financial planning and mutual funds can help you with that.

A regular source of income is a must requirement for a well-planned post retirement life and mutual fund investments can help you build one. To retire early and still have a regular source of income that meets your lifestyle, there are some things you need to follow.

Retirement Plan: The primary factor is to determine the age you wish to retire at i.e. what does early retirement mean for you. This is crucial as it would help you estimate the number of years you have will be earning and the approximate number of years you would need to save for.

Then decide on the target amount you would need annually to meet the standard of living that you wish to have post retirement. Based on this you can determine the amount you need to save regularly to meet the retirement target. A retirement calculator can help you in defining the investment amount.

Early Investing: Early bird gets the worm. So, start saving and investing at an early age. The longer the term of investment, the better is the expected return. In case you haven’t started early, don’t be disheartened. You can start now and still be able to reach the target amount maybe with a few adjustments.

Disciplined Investing: Once you have the retirement plan in place, make sure to stay on course. Disciplined investing is a must to meet your retirement goal and systematic investment plan (SIP)  is the best way to reach your goal. You can invest in different types of mutual funds based on your risk appetite and time to retirement. For eg: if you are in your early 20s, you can have higher allocation to equity mutual funds which carry comparatively higher risk. As you move near your goal, you should start shifting your investments to less risky mutual fund categories such as hybrid or debt funds.

Additional Booster: Windfall gains or additional cash flow in the form of gifts or bonus can be invested as a lumpsum to provide a boost to your existing retirement plan.

Clear your Debts: It is always advisable to pay off all your debts before you retire, so that unnecessary bills do not eat up your limited income thereafter. Always start with clearing your smaller debts and loans such as credit card bills or any other personal loan and then move to heavier debts such as car loans and home loans.  

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