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Is Early Retirement At 37 Possible With A 2.2 Crore Corpus?

Ramalingam Kalirajan |7435 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jan 02, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Dec 03, 2024Hindi

Early Retirement Query Hello , i'm from West Bengal . My age is 37 and am pursuing a job in state govt. sector for almost 11 years and i live in a non-metro sub-urban city . But , unfortunately , my professional surroundings are full of toxicity and i have completely lost my job-satisfaction in this job . Incidentally , a few months ago , i've inherited a moderate and relatively substantial amount of ancestral wealth after my father's death . I'm not bearing any kind of loan / e.m.i and residing in my own house . My present gross salary is almost 5 LPA and my current annual expenses are of almost 3.5 LPA . Am married , having a 5-year-old son . My mother is alive and she is not financially dependent upon me and she has health insurance coverage of 10 lakhs . Including my own savings , at present , my available net corpus is almost 2.20 crores ( 1.34 cr. in bank & post office FD , 40 lakhs in mutual fund in lumpsum through STP from debt to equity , 16 lakhs in liquid emergency fund , 10 lakhs in LIC deferred annuity scheme and 20 lakhs in physical gold ) . Right now , i want to quit my job depending on this fund and use this corpus to generate passive income for lifelong through diversified investments . So , is it possible to retire early in terms of my present financial backdrop ? Although , personally i haven't any family health insurance and term insurance till now . Can i retire now ?

Ans: Your current financial situation indicates you are well-positioned for early retirement. However, early retirement requires meticulous planning to ensure financial independence for life. Below is a detailed evaluation and plan based on your inputs.

Current Financial Position
Strengths

A substantial corpus of Rs 2.20 crore is a strong starting point.
You have no loans or liabilities, ensuring no outflow towards EMIs.
Your expenses are reasonable compared to your corpus.
Challenges

Lack of health and term insurance exposes you to financial risk.
Dependency on bank and post office FDs reduces returns.
Opportunities

Your mutual fund investments can be a reliable wealth generator.
Diversifying your corpus can enhance returns and ensure stability.
Critical Steps Before Quitting Your Job
Health and Term Insurance

Get a family floater health insurance of at least Rs 20–25 lakh.
Purchase a term insurance policy to cover 10–15 times your annual expenses.
Emergency Fund

Retain Rs 16 lakh in your emergency fund.
Ensure it covers at least 12–18 months of expenses.
Expense Analysis

Track and categorise your expenses for better control.
Plan for inflation-adjusted expenses for the next 40–50 years.
Diversified Investment Plan
Equity Allocation

Gradually increase your allocation to equity mutual funds.
Actively managed funds can deliver better returns than index funds.
Systematically transfer funds from debt to equity over 12–18 months.
Debt Instruments

Retain a portion in debt mutual funds for stability and predictable income.
Consider shifting some FDs to higher-yielding debt funds.
Regular vs Direct Funds

Regular funds ensure periodic reviews and professional advice.
A Certified Financial Planner can optimise your investments.
Gold

Retain gold for diversification, but avoid exceeding 10–15% of your portfolio.
Avoid further investments in physical gold due to storage and liquidity issues.
Withdrawal Strategy

Withdraw only 4–5% annually from your corpus for expenses.
Plan withdrawals from funds with minimal tax implications.
Tax Management
Income Tax Savings

Optimise Section 80C and 80D deductions.
Consider tax-efficient instruments like PPF and NPS for additional contributions.
Capital Gains Tax

Long-term capital gains above Rs 1.25 lakh in equity mutual funds are taxed at 12.5%.
Plan redemptions carefully to reduce tax liability.
Creating a Passive Income Stream
Dividend-Yielding Investments

Focus on equity funds and stocks with a track record of consistent dividends.
Systematic Withdrawal Plans (SWPs)

Use SWPs from mutual funds to generate monthly income.
SWPs provide tax-efficient and steady cash flow.
Balanced Funds

Invest in balanced or hybrid funds for a mix of growth and income.
Lifestyle Considerations
Health Management

Prioritise regular health check-ups for you and your family.
Keep an emergency health fund aside even with insurance coverage.
Family Goals

Plan for your child’s education and future expenses.
Invest in Sukanya Samriddhi Yojana or other suitable child-focused instruments.
Financial Independence Checklist
Your annual expenses should remain below the returns generated by your corpus.
Regularly review your investments and rebalance your portfolio.
Stay disciplined with your withdrawals to ensure corpus longevity.
Final Insights
You are financially ready to quit your job, provided you implement these steps. Diversify your investments, secure adequate insurance, and manage expenses smartly. A well-planned strategy will ensure you achieve early retirement and lifelong financial security.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.