Three Ways to Retire Before 60

1
Three Ways to Retire Before 60
2
Repaying loans early, moving to cheaper cities
and using tax breaks can help you retire
early Can you retire before 60? Well, the answer
depends on your ability to live on your passive
income. Passive income is any income earned
without working. This could be interest income,
portfolio income, dividend or rent. Here are a
few strategies to get there. Repay your loans
faster Most people carry their home loans and
other loans for the full repayment period,
usually 15 or 20 years. However, if you are smart
and have the motivation to retire earlier, commit
to put 50 per cent of your annual bonus amount as
pre-payment of your home loan. Of course, bonuses
are subject to business results being good that
year. But even if you commit half of this amount
towards paying the home loan, the results can be
positive.
3
Rohit, 40, has a ?30-lakh home loan on his flat.
He is paying an EMI of ?32,000 for 15 years. He
earns ?10 lakh as salary and a bonus of ?2 lakh a
year. Let us assume he commits 10 per cent more
every year, which is possible due to salary
raises. Even if he commits only half of this
bonus towards pre-payment, Rohit will be able to
become debt-free in just nine years. Two, you
can move to a smaller home as children go away to
either study or work. This will release money,
which will fund your retirement corpus, allowing
you to retire earlier. Or this money will help
prepay the home loan that you are already
servicing. Three, you can retire to a cheaper,
preferred location like your hometown. Many
professionals are exercising this choice
nowadays, after working for years in big cities.
4
Selling an expensive home to buy a cheaper home
in smaller town releases money for retirement
corpus. This can lead to a significant cash-flow
increase immediately as the smaller town is
usually cheaper to live in too. The price of
goods and services too, is often cheaper by 15
per cent or more. Re-evaluate monthly needs If
you wish to retire, you need a retirement fund
that lasts through your old age. This is the sum
total of retirement assets such as EPF, PPF, FDs
and other savings that you have accumulated. How
big this fund should be depends hugely on the
monthly living expenses. Singh, 40, has
household expenses of ?50,000 a month. This
comprises groceries, utilities and maintenance,
transport and entertainment expenses. He would
roughly need ?1.5 crore in a retirement fund to
be able to retire comfortably.
5
Let us say that with Singhs current income, this
figure can be attained only by the age of 60. But
if he reduces his monthly expenses by ?15,000
(say ?7,000 by way of petrol/driver expense and
?8,000 through trimming entertainment expenses),
the corpus required reduces to ?1 crore. This
can certainly be achieved by the age of 56. After
peaking at age 50, household expenses for
families generally reduce. Be a tax-efficient
investor Taxes eat away a significant part of
your future retirement fund. There are benefits
given by the government for salaried people to
save for the long term and to secure their
future. The key ones are under Sec 80 CC and 80
D
6
Section 80CC offers a maximum benefit of
?1,50,000 a year towards home loan interest, LIC
premium, savings in PF and childrens fees.
Section 80 D offers a benefit of ?25,000 per
annum for medical insurance. Suppose there are
two salaried employees Anil and Sunil both 30
years old. They earn ?10 lakh a year as salary.
Anil is smarter and avails of the tax breaks.
Sunil is blissfully unaware of these. Suppose,
Anil uses his tax breaks to the full, he will
invest ?170,000 in the above instruments and take
home ?8.9 lakh. Assume Sunil uses no tax
breaks, he will take home ?8.56 lakh.
7
If Sunil saves 10 per cent of his salary (?85,000
a year) in mutual fund SIPs yielding 15 per cent
return over the long term. Anil does exactly what
Sunil does and also adds his tax savings to this
contribution. The results again are amazing.
While Anil will end up with ?5.40 crore at 60,
Sunil will have only ?3.60 crore. Anil can
retire even in his early fifties with ?2 crore to
his name. Better tax planning has helped him
finish far ahead of his peer despite both of them
earning the same amount! Retiring early is not a
pipe dream. This can be done with careful
planning and implementing the above
strategies. source http//www.thehindubusinessl
ine.com/portfolio/beyond-stocks/three-ways-to-reti
re-before-60/article7364117.ece
8
To Know More Details https//www.bajajallianz.co
m/Corp/retirement-plans/retirement-plans.jsp
https//www.youtube.com/user/jiyobefikar
https//www.facebook.com/bajajallianzlifeinsurance
ltd
https//plus.google.com/bajajallianz/posts
https//www.linkedin.com/company/bajaj-allianz-lif
e-insurance-co-ltd-
https//twitter.com/bajajallianzLIC