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risk of early retirement

5 Major Risks of Early Retirement and How to Overcome Them

by Holistic Leave a Comment | Filed Under: Retirement Planning

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The Risks involved in thinking on “How can I get early Retirement?”

Dreaming on “How to take early retirement ?” or ““How can I get early Retirement?” seems fantastic. Just say goodbye to your work and pursue your passion, hobbies, engage in charity activities, travel or just sit and enjoy life. To retire at the prime of life and have freedom to do whatever you wish to do is seductive. There will be no more daily grind of rushing to office, meeting deadlines, office politics, and such stuff. But before you call it a day at work, think it over and again and make a decision on ‘at what age can I retire?’. Retiring early may ensue in lots of trouble if not planned properly for financial independence.

To illustrate the risks of early retirement, ‘The Lotus Eater’ a short story by Somerset Maugham will come handy. The story has a Wilson who chucks his job of bank manager and goes to live in beautiful island of Capri to breathe serenity. In the following years his savings gets dried and he is reduced to live as farmhand in his landowner’s house and finally dies deranged. A man who pursued his passion met with a tragic end.

Retiring early has its share of risk. So you must do a risk-analysis of early retirement before you take the plunge. The following are the 5 major risk areas that can spoil the enjoyment in your early retirement if not planned properly.

1) Extra Expenses:

If you want to maintain the current lifestyle post-retirement, as a rule of thumb you need to spend 80% of what your current expenditure is. But if you want to travel, learn shooting or fix up some vintage car as a retiree, your saving of 20% by not working will be expended.

As you are retiring early, you can’t sit idle like a regular retiree. You may like to explore something. This will increase your expenses.

2) Extra Years to cover up:

Another factor of consideration is your timing of retiring early. The earlier you retire the more money you need to cover up your non-working years. This also includes medical expenses and nursing care.

3) Risk of Economic Recession:

Now you have arrived at the amount for your post-retirement life after considering all aforementioned factors, is it enough to stand you in good stead in worst-case scenarios. If the overall economy is performing below the par, your average returns will take a dip and you’ll be forced to bite into your investment capital and over the years your assets could shrink.

4) Extra-ordinary Inflation:

The inflation can shoot up your living expenses and your retirement life would be in trouble. The compounding effect of inflation can easily & out your retirement corpus if you have not considered and accounted them properly in your retirement plan.

5) Medical Expenses:

Of course, you could have taken a separate mediclaim policy . However, there may be some ongoing regular medical expenses which are not covered under your mediclaim policy. You need to factor in those expenses as well in your retirement corpus. At times your poor health may destroy your wealth and make you poor.

The Right Reasons for asking “How to take early retirement?”

If you are contemplating on “How to take early retirement?” or ““How can I get early Retirement?”, you must ask yourself why. Is it because you dislike your current career and want to end the pain? The best you could do is to find a more fulfilling job and enjoy more of your time and money now, rather than saving it for uncertain future.

Retiring early with financial independence, but without a strong motivation may put you in a state of non-activity and meaningless life. Maybe you have a dream to dedicate yourself to some creative pursuit like writing a book, to teach underprivileged children, or maybe you just want to travel. A powerful motivation is compulsory not only to make your early-retirement life enjoyable but to make it easier for you to stick to a strict financial plan.

If you retire early, you have got more time to fill in some meaningful way and also more non working time to pay. Say you have 20 -30 years to enjoy retirement, you must have some activity to pursue that satisfies you and enough money to sustain you though all these years. So you need a strong reason to quit your job and must find ways to stretch your savings and time. Otherwise, you will face the risk of sitting idly and feeling frustrated for not doing anything.

You must make use of this Retirement Calculator to get a clear idea of what lies ahead in your post-retirement financial life and how can you live your post-retirement life FREE from every financial stress. Let’s use this calculator and figure out the ways to fire-up your retirement:

Are you retiring early with Financial Independence?

It is not just retiring early; but retiring early with financial independence. This is the most fundamental part of early retirement. When you plan for early retirement, you need to assess your current net worth. Net worth is calculated by adding up all your assets – stocks, retirement corpus, and cash – and deducting all your outstanding debts – credit card debts, loans, and mortgage. Once you know how much money you have, you have to figure how much money you will require when you retire.

There are many factors that determine the corpus for retiring early with financial independence: what my lifestyle would be after I retire, at what age I can retire and what I want to do after retirement.

Best ways to Retire Early

Along with a strong reason to retire early, you need to have a proper plan for your post early-retired life. If you cease to work that doesn’t mean you won’t have bills to pay. Besides all your regular expenses, you have to consider some unexpected ones like hospitalization and medical bills. So you consider the following for a best way to retire early:

How many years you have for your post-retirement life?

How much money you need to live your post-retirement comfortable?

What activities you want to pursue for a fulfilling life?

In the initial years of early retirement, you will be very enthusiastic about doing things, exploring new places, or pursuing hobbies. After the honeymoon period is over, boredom and emptiness may creep in. So you need to always find ways to keep you upbeat and energetic. As well you need to have enough funds to make your life comfortable. You can’t be sure about future. You may live longer than you expected and unexpected health issues can crop up. To avoid the risk of doing nothing and being penniless, you must have a long term plan for your post-retirement life.

Having a sound retirement plan and long term plan are the best ways to retire early.

Do you have a back-up plan?

There are many financial issues that will jeopardize your early-retired life. And finally you must factor into failure too. What will you do if you retire early and can’t manage your life. You must have a back-up plan to get back to the work world.

Early retirement has its own boons and pitfalls. After calculating all the risks involved, if you still have the strong urge to retire early, go ahead and plan properly in advance for financial independence. Life is about happiness and happiness is about the journey- not the destination.

To have a peaceful retirement, having a futuristic financial plan for retirement will be of great help. If you are REALLY interested to create a workable financial plan for retirement, then you can take advantage of our

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Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
Lionel Faber
Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
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