Hate your regular job? Here is how to retire at 40

It is a brutal truth that most of us hate our 9 to 5 jobs. The idea of doing the same thing for the rest of our lives is too boring. Both single and married people have the aspiration to get retired at 40 and do something of their own. However, the biggest worry that comes in the middle of this plan is finances.

So, if you retire at 40, then you would be needing a steady source of money for the next 30-40 years without any fixed income. Hence, if you really want to retire early then you need to have a solid plan in place. A plan that is capable of funding your retirement and other financial goals efficiently.

For example, if you are a 30-year old person with expense of around Rs 50,000 month then you would need around Rs. 2,87,174 per month to meet the same expenses at the age of 60 after adjusting the inflation at 6%.

How can you build such a large corpus? Seems impossible? Well, not really!

Here is why:

Start Investing Early

Starting your investments early enables you to invest in more risky but highly rewarding investment instruments and the power of compounding multiplies your wealth at a faster pace on a YoY basis.

Let us assume you start investing Rs 10,000 per month at the age of 25 years. After 15 years, you will accumulate a healthy corpus of Rs 54.97 lakh at the rate of 13%. As your income grows, you can keep on increasing your investments to easily build a healthy retirement corpus.

Invest in right instruments

To create long-term wealth, it is crucial to beat the inflation. Hence, you should invest in mutual funds to earn inflation-beating returns. If you want to retire in the next 15 years then you should build your portfolio with both debt and equity. Allocate around 80% of investment towards equity and 20% towards debt. You can reverse the allocation once you near your retirement to cut down risk and redeem some amount.

You can start by building a diversified portfolio by having small-cap, mid-cap, and multi-cap funds along with some money parked in debt funds.

Liquid funds will keep your portfolio stable during turbulent market conditions and will help build funds for short term needs as well. You can also leverage liquid funds as an emergency fund. It also makes sense to invest in liquid funds if you have already invested in FD, PPF, and other tax saving instruments.

How much you actually need for retirement?

If your monthly expenses are Rs 50,000 right now then after 15 years, you would need around Rs 1,00,000 month to live a comfortable life. That's 12 lakh per month. To generate a steady return of 12 lakh per annum from your funds, you need to build a corpus of 3 crore in the next 15 years.

Assuming, 15% YoY returns on your investment, you need to investment Rs 44,876.14 per month for the next 15 years. If you don't have the resources to invest this much per month at this point in time then fret not. You can start investing with even Rs 28,000 per month and keep on increasing the investment by 10% every year as your income increases to reach your goal.

If you are really serious about early retirement, this investment route might help you achieve your financial goals.