Chapter 3: The Final Evaluation of Retirement Corpus

..Continuation of Chapter-2

All this while during my career, I understood that the success rate of any achievement depends purely on how good your planning and executions were, backed by right decisions at right time.

Tough times do teach you various life lessons, and I was no exception. Here are a few lessons that made me wiser in handling the following areas:

• Cautious Spending and Calculative Approach: It is wise to be deliberate and consider the long-term implications of significant purchases like properties, vehicles, etc. Evaluating the utility cost per unit ensures that you're getting value for your money.

• Smart Use of Credit Cards: Keeping credit utilization low (around 30% of the credit limit) is a good practice for maintaining a healthy credit score. Avoiding payment defaults demonstrates financial discipline.

• Managing Loans: Recognizing loans as tools for building assets while prioritizing early repayment helps reduce overall financial burden and interest costs over time.

• Assessment of Financial Capacity: Understanding your financial capabilities before committing to lifestyle expenditures helps in avoiding overextension and financial stress.

• Debt Management: Prioritizing the repayment of existing debts before taking on new liabilities is crucial for maintaining financial stability and reducing risk.

• Savings and Investment: Cultivating a habit of saving and investing is fundamental for building wealth and achieving financial goals over the long term.

After a strong take-off, acceleration, and consolidation phase in my career, there was no looking back. My capital accumulation, including both paper assets and immovable assets, had become quite considerable by then.

My financial discipline gave me the power to think, the strength to go all out, the courage to set an unusual target to 'retire early,' and above all, my self-belief gave me the confidence to 'go for it.'

I seriously begin working on my 'exit plan' sometime in 2015. I was quite stable in my career then, but however chose that time because of various reasons, to prepare myself mentally and start organizing all the necessary things that were needed, keeping in mind a timeline of 5 (five) years ahead. The first step that I took, was to prepare a list of things that were extremely important to be achieve before I even think of 'exiting my job'. Hence, a plan of action for each agenda was drawn and eventually executed one after the other in due course. The agendas were like; a/ squaring off all my debts (i.e. zero liability), b/ determining the necessary future financial requirement post exit, c/ build the necessary contingency fund, d/ organize for the necessary 'cash flow' from passive income after exit, and so on.

My immediate intent was to find out how much corpus I would need to retire comfortably, hence I got involved into the findings.

In general, anyone wishing to retire early would first decide on their 'retirement age' and then estimate their required 'corpus.' Once that is done, they start working on the necessary wealth creation strategies. However, my approach was completely the opposite.

Since my wealth accumulate till then was quite substantial. So for me it was important to find out whether the wealth so accumulated was enough or not? Hence to figure out the appropriate requirement, I went on to do 'research and analysis' with the help of the studies which were already available in the internet (like: 'Expanse-based Method, Replacement Ratio Method, Monte Carlo Simulation, 25x Rule, 4% Rule, and Online Retirement Calculators'). Such studies did give me a broader idea to estimate my retirement corpus. Trust me, I was shocked to notice that I was almost there and can comfortably make an exit as per my target time, provided I manage to pay off my debts and make some modification to my fund allocations. All this could have been possible due to the following practices;

• Started investing at an early age.

• Maintained discipline towards savings, planning and investing all throughout.

• Took Risk.

• Allowed my capital to grow in long-term, and enjoy the power of compounding.

• Maintained a diversified portfolio.

• Continued investing regularly.

• Lucky to have chosen the right schemes and right type of investing instruments.

• Identifying the right 'immovable properties' and investing on those were bang on, etc.

In the entire process what I noticed was that, there is no fixed rule when it comes to deciding the right retirement age. Everyone faces a distinct situation with different sets of liabilities and varying quantum of savings for their life goals. Hence, each one will have to pick and choose a retirement age which suits best in their situations.

While most would like to retire early, it comes with its own set of challenges. The sooner you want to retire, the longer will be your post-retirement life. As a result, on one hand, you will have to arrange a bigger retirement corpus for maintaining your longer retired life, and on the other hand you will have lesser time to save the required amount. It is only feasible if you have an extremely high income, else you will have to give yourself a long-time frame for saving. Therefore, you will have to try different time frames to find which one suits you the best.

In my case, I was very lucky to have eventually managed to achieve everything that were necessary within the set five years of timeframe.

My intention was never to hold onto my position solely for the purpose of making more money and continue serving others to build their businesses. Instead, I aimed to create opportunities for new employment by stepping down when I am ready—and that’s exactly what I did in 2020 at the age of 48!

By then, I have been able to put all the following things in place;

• Zero debt in the market.

• Ready with the required corpus that could support my family and me for the rest of our lives.

• Arranged sufficient passive and annuity income sources so that cash inflow is kept intact.

• Comprehensive plan on growing the capital that beats inflation.

• Contingency fund & Family health Insurance.

• Daughter's future financial security.

• My post-retirement engagements, etc.

Whatever method of calculation you use to estimate your 'retirement corpus', the basis would always be built on certain assumptions about multiple variables and factors for possible future scenarios, thus would always differ from person to person. In short, there's no one style or method of calculation that can fit any situation.

The more accurate you can get with your estimated retirement income needs, the more reliable will be your savings strategy. No formula can predict or consider future unknowns, so it’s important to include various scenarios in your retirement planning. In normal scenario, your healthcare costs is likely to increase as you get older, while recreational expenses will decline over time, so it is important to include these financial changes when you estimate your annual retirement income goal.

Sharing a link of the formula that I have collected using multiple data points and assumptions to aid my daughter, so that she can use it as a reference to estimate her 'retirement corpus'; https://1drv.ms/x/s!AiqUVtuFKcYNpgtJTFC7UdzHnwyf?e=ekHZ9b

Today when I look back, I really feel happy that whatever processes I followed in building wealth was almost similar to that of the rules and procedures which were already there in the books. I just applied my knowledge and common sense towards growing wealth, but little did I thought about the end result. I was stunned in seeing that everything I did unknowingly was right, which actually resulted in an extraordinary output.

My journey to 'early retirement' might sound very simple, but the efforts put in and the sacrifices made towards maintaining self-control and financial discipline even during adversity, actually differentiated me from other individuals who wish to walk the same path but fails to make it.

Conclusion: If you are RICH, you can BUY whatever you want, but if you are WEALTHY, you can DO whatever you want—the choice is yours!

Kaushik Sarkar

mail id: tokaushiksarkar@gmail.com

Disclaimer: This article completely reflects my thought process, understanding and reminiscence of experiences over times. it is always better to seek the help of a certified financial planner for your individual situation.