Factors to consider to retire at age 50 starting at age 30

If you're in your early 30s, the thought of early retirement is likely. Especially if you are not interested in the work you are doing. However, most people will have to work until much later in life, i.e. until the age of 60. Because most people (either due to circumstances or due to financial discipline) cannot manage a job. Such early retirement goals require a higher savings rate.

Although the idea of early retirement is tempting, it is not at all easy. Let's take an example:

Imagine you are 32 years old and tired of your job. For practical reasons you aim to be financially independent (early retirement option) by age 50.

You have 18 years to save for your retirement. But as life expectancy increases, chances are you will live to 85-90 or even more. So, if you are retiring at 50, you need a corpus that will last you 40 years of retired life (age 50 to 90).

A simple retirement planning exercise would require a current annual expenditure of Rs 7.5 lakh at age 32, an average inflation rate of 6 per cent over the years, a post-retirement return of 7-8 per cent, and a roughly 60-40 equity-debt portfolio at the time of accumulation. Over the years, you'll need around Rs 6 crore-7 crore to take an early shot at retirement at age 50.

Here are some general points to keep in mind:

First things first, saving for early retirement may not be your only goal. If you have a family, you need to save separately for your children's future (higher education and marriage), buying a house to live in, etc. The money required for all these purposes will be in addition to the retirement corpus.
There will be large non-annual expenses every few years. Like house repairs, car purchase etc. They generally don't feature in normal expenses, but when they do, they take a chunk out of savings. So, if you plan to retire early, you should plan for this aspect as well.
Since you will have multiple decades of life after retirement at 50, it is best to be conservative in assumptions to increase the chances of your corpus lasting a lifetime. If not, this will help avoid the dreaded scenario of running out of money before years are up.
Everyone wants to live long. But living longer requires money. Therefore, it is essential to plan for more years.
You will have health insurance. But keep some buffer for uninsured medical expenses in later decades. Your insurance doesn't cover everything. So, plan to set up a medical contingency fund.
* Be aware of sequence-of-return-risk. Most people don't understand or know about it. But if left unchecked and your luck turns against you, your retirement plan can be derailed.
One of the greatest dangers is ignorance. You only have one shot to save properly for the goal of Retire@50. You need to be sure about the numbers. Because if you get it wrong (save less and retire with more than required corpus) and realize it after a few years of retirement, there is no going back as you will not get any job. So, make sure you get the (early) retirement numbers right. If you cannot do that, take help of investment advisors.

Early retirement is still an attractive goal for many, especially young people. But it will require a lot of savings (read about this formula for accelerating early retirement). And one more thing - in an effort to reach your destination quickly, don't miss out on enjoying the journey itself. So, while you definitely need to save and invest to become financially independent soon, don't go overboard and sacrifice the present for an imaginary future.