These millennials will retire in 40s
Young professionals are living by a
new motto — Financial Independence, Retire Early (FIRE). All so that they can
put up their feet by a ripe young age
Before they got married in 2014, Naren spoke to his bride-to-be
Sugandha about an idea that had been close to his heart for years: saving and
investing enough to be able to escape the rat race as soon as possible.
Sugandha, who worked at a Gurgaon startup and was used to splurging, took some
time to see his point of view. Eventually, the couple began their married life
by working for a goal many only dream of — retiring at 45.
“When you become financially independent by 45, you can make
bold life choices like changing careers, starting a business, working fewer
hours for a healthier work-life balance or, simply taking a break for a few
years,” says Naren, 36, who tracks his progress on his blog Saving Habit and
wants to work in a non-profit post retirement.
Naren and Sugandha are part of a small tribe of Indians inspired
by an online movement called FIRE — an acronym for Financial Independence,
Retire Early. There is even a FIRE India forum on Reddit to exchange tips on
personal finance. Many follow the blog, Mr Money Moustache run by an American
Peter Adeney, for guidance. He and his wife retired at 30 by saving upwards of
70% of their income each year. And yes, they managed this without winning the
lottery or banking on an inheritance.
For Indians, early retirement is more difficult. In a 2017 global
retirement index of 43 countries which took into account factors like saving
avenues, healthcare etc, India ranked the lowest. But many millennials are
still FIREd up. For some, especially IT professionals, it is a way of coping
with the fear of layoffs in the time of new technologies, and seeing their
incomes stagnate as they reach middle management. Naren’s own difficulties in
finding a job after graduation and later working as a techie in the US made the
idea even more appealing. “Our parents’ generation expected to have job
security till 60 and then retire with a pension,” Naren says. “We expect
neither.” While real estate was his parents’ biggest investment, Naren’s
generation prioritises personal freedom and career mobility, and focuses on
inflation-beating investments and liquid assets.
Financial planner Surya Bhatia says early retirement was never a
primary objective like it is now. “People strive and work towards financial
independence, and even go the extra mile to save,” he says.
For others, it spells escape from the corporate grind.
Delhi-based online marketing professional Ankit Garg wants to hang up his boots
early because he wants to spend more time with his son. “Our generation values
their time more than anything else,” says Garg, 34, who runs the blog 60to45.
“Today’s jobs are more strenuous, and people burn out sooner.”
Hyderabad’s Rajshekhar Roy, who was 49 when he retired from
corporate life in 2014, says many people also opt out when they realise there
are limited chances of moving up the professional ladder. “Only a few people
become CEOs,” says Roy, who himself retired as a CEO to pursue other interests
like travelling, training others and sports. Today, he spends half his time
working as a consultant and taking workshops. “Many think ‘I’ll travel at 60’,
but I believe that is too late an age to do something new,” he says.
Of course, retirement doesn’t necessarily mean you stop working
completely. “My idea of FIRE is to have enough money to have an option of not
working ever again but not the obligation,” says Lucknow-based investment
adviser Dev Ashish, 33, who has helped several of his clients become
financially independent.
In the meantime, Naren and Sugandha are working towards their
goal. They moved to Goa as it’s quieter and has lower living costs than the
metros. They don’t dine out more than once a week, buying gadgets only when
they stop working. Instead of buying a house on EMI, they saved up to purchse
one as an investment and currently live on rent. They use cash instead of a
credit card, and take only domestic holidays. “Rewiring our
instant-gratification spending habits towards delayed gratification took effort
initially,” says Naren, who has saved 34% of his target. “We are able to cut
down our expenses just by buying what is needed and not wasting what we already
have.”
Naren and others are aware of the challenges unique to India.
“While inflation rates in the US are 3-4%, actual inflation in India is close
to 8-10%,” says Pattabiraman M, an IIT-Madras professor, who runs the popular
blog Freefincal. “The biggest challenge is having enough to handle inflation.”
Also, unexpected expenses such as a medical emergency may disturb your plans.
“Life’s googlies can be difficult. When you’re young, you think you can wing
it, but not when you’re 45,” Pattabiraman says. “Even if you have enough money,
it is better to have a reasonable source of side income so you can choose when
to work and how to work.”
For Garg, the key is to first invest and then spend. “Usually,
people take care of monthly expenses and then save the rest. I flip this,” says
Garg, who creates his personal budget for the year in January. “As your income
increases, it is your saving rates rather than your expenses which should go
up.” This has meant selling his second car, buying a phone under Rs 10,000,
travelling only in the off-season, and minimising eating out despite being a
foodie.
Yet, the pressure to keep up with the Joneses can make it hard
to stay focused. “In my friends’ circle, everyone’s kids wear branded clothes,
but I will use that money for my son’s education,” Garg says. “Everyone wants
to retire early but not everyone wants to go through the journey,” he adds more
philosophically.
Sonam.Joshi
TOI29APR18
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