Part II: Early bird's mantra

"Retirement is about fighting inflation," says Veer Sardesai, a Pune-based financial planner. Early retirement means that your accumulated funds need to last longer. So, you need growth investments that typically beat inflation.

You would also need sustained high growth, as many major goals such as kids' higher education and marriage will tend to happen after the point of early retirement. "Many people who retire early tend to invest excessively in fixed income securities," points out Sardesai.

Before you start investing, work out the numbers in order to have definite targets. "Current monthly expenses will give you an indication of future requirements. The standard of living required after retirement has to take into account inflation," says Lovaii Navlakhi, a Bangalore-based financial planner.

Secure the home front

Even as you monitor the brisk progress of your investments, you need to ensure your housing post-retirement is taken care of. Being a big expense, often involving loans, you will have to finish off this business before retirement. This is what Bangalore-based V.A.Ramakrishna, 48, and Hyderabad-based Rajeev Nagpal, 50, did when they retired early in 2007.

Ramakrishna, an alumnus of IIM-Bangalore, ended his more than two decades of corporate career in the IT sector when he hung his boots as a vice-president of a reputed IT company. The bug to start something that wasn't linked to his previous work bit him.

A chance meeting in his hometown of Tumkur with a friend who was running a pre-school after a stint in New Zealand gave him an idea. Ramakrishna decided to be an education entrepreneur and set up an international-class pre-school chain in India, along with his friend and other acquaintances. Ramakrishna and his associates set up three pre-schools in Bangalore last year.

Even as he was planning his professional future, Ramakrishna built a house with proceeds from previous stock options. He had other real estate investments as well. This year, he hopes to sell one such investment to close off his home loan.

Nagpal took similar steps. He retired from the corporate world in November 2007 to work on his own as a consultant since he wanted to slow down the pace of his work life and do only the work he liked. Stressful work and endless travel as a top executive prevented him from spending quality time with his wife Monica, 50, and 10-year-old daughter Payal.

Real estate investments, including his home, gave him security for an early retirement and ensured rental income that acted as a buffer post-retirement and covered living costs.

Where you decide to have your home after retirement needs to take into account expected living costs in the location and your future professional plans. If no fresh salary income is expected and you plan to subsist only on investment income, maybe it is a better idea to relocate to a destination that has a lower cost of living. However, if you plan to be engaged in some professional activity, living on in a large city will be the obvious way forward.

Healthcare costs

"For normal or early retirement, planning for health insurance cover after retirement is essential," says Mashruwala. There are two major reasons for this. First, healthcare costs will grow faster than inflation. No or underinsurance means that your retirement funds could take a needless hit and make you financially vulnerable.

Second, as you age, you become more risky for the insurers to insure. They are likely to charge you more premium for higher coverage or decline it altogether. "Family history can indicate future health requirements of the individual," suggests Navlakhi.

Take this into account in the planning process. Get individual health covers if you have covers provided by your employers. These would replace the latter after retirement.

Have a Plan B

Even the best laid plans can fail. When planning for early retirement, make sure that you have options to fall back upon. "I always had the option of going back to the corporate world," says Nagpal. The same was true with Singh Karan. At the same time, you need to give things time to settle down.

"In the first few months, you do end up asking yourself whether you are doing the right thing and whether you will end up losing out," says Singh Karan.

Ready or not?

When do you know that you are ready to retire? "As a thumb rule, you can retire and live comfortably for the rest of your life if you are able to manage all living expenses within 2 per cent of your assets excluding your home," says Sardesai.

But others will argue that it has a lot to do with your state of comfort. You can have all the money and still feel insecure. Mike Todd, a Hollywood producer and the late husband of actor Elizabeth Taylor, once said: "I've never been poor, only broke. Being poor is a frame of mind."

After retirement

Spend prudently. Once you have taken the big step, you need to remind yourself that your money has to outlast you. "You need to understand that income is now fixed and lifestyle should not be upgraded," says Sardesai.

Fight inflation. There can be no lull or pause in your war against inflation. You need to be invested in growth. However, post retirement, you will need to balance three seemingly conflicting objectives of liquidity, income and growth.

An imbalanced portfolio can be risky. More liquidity or income from retirement assets means a losing battle against inflation, while a portfolio that tends towards growth means losing out on regular income and liquidity.

The way out is to "keep about six months' living expenses in liquid assets, 3-4 years' monthly income in regular income options and the rest in growth options," advises Mashruwala. Regular income can come from options such as the Post Office Monthly Income Scheme and dividends from monthly income plans of mutual funds.

Experts like Sardesai feel that if you are retiring early, ideally, 50 per cent of the retirement portfolio should be in growth investments.

Review life cover. Unless you are working and have dependents, you can do away with your life cover if it is a term plan. For other kinds of plans, see them through till the end of the term, but don't buy any fresh policy since your assets will provide income to your dependents. Of course, you need to keep continuing to meet the premium obligations for your health cover.

So, does an early retirement now look like a summit than can be conquered? "The essence of retirement is freedom—the freedom to do something if it grabs you, and drop it when it stops doing so; to decide you don't trust or like a prospective employer, contractor or colleague, and walk away," says Satyanand. Clearly, one has to plan, make efforts and sacrifices to attain this freedom and do everything possible to preserve it.