Nowadays, the trend of retiring early by achieving financial freedom at a young age is increasing. Usually, stories of retiring at the age of 40 seem very tempting, but have you ever thought or understood the other aspect? There are many negative aspects of retiring early, which are not often discussed. Today, we will know those 5 bitter truths of retiring at the age of 40, which are very important to know before turning your dreams into reality.
1. The biggest challenge: A long period of financial uncertainty
By the way, retiring at the age of 40 means that you will have to live for the next 40-50 years with your saved money. During this time, inflation also rapidly reduces the purchasing power of the money you have saved.
Risk of inflation:
Suppose that the goods that are available for ₹ 1000 today will be available for ₹ 3000 after 20 years. That is, keeping in mind the future, your fund should be very big so that it can beat inflation.
Growth in health expenses:
Health-related expenses also increase with age. In such a situation, a person retiring at the age of 40 bears the risk of these expenses for decades.
2. Lack of purpose and identity
For many people, their work is not just a means of earning money, but it also gives them a purpose and identity in life.
Feeling of emptiness: after leaving work, many people feel a sense of emptiness and directionlessness. They do not understand how to spend their time.
Social identity:
The identity gained from a job or business also ends over time, because people can feel disconnected from society.
3. Mental and social distance
After retiring at the age of 40, you get separated from your friends and co-workers, because they are still working. Different lifestyles:
The lifestyles, expenses, and topics of conversation of your friends will be different from yours, which can gradually increase social distance.
Social isolation:
By taking early retirement, you may feel limited in your social circle, because everyone is busy with their career.
4. Planned savings and investments
To retire early, a very big savings and investment plan has to be made.
Sacrifice of youthful dreams:
To take early retirement, you have to sacrifice many expenses and desires in your youth, so that a large fund can be accumulated for retirement.
Risk of change in the future:
This can change the circumstances in life at any time. After 10 years, you may feel the need to work again, but returning to work after such a long gap can be very difficult.
5. Pressure of investment on retirement fund
A person retiring early always keeps withdrawing money from their fund. If the market goes into a recession for a long time, then there can be a lot of pressure on the fund.
Risk of continuous withdrawal: The magic of compounding also decreases rapidly if money is withdrawn from the fund for a long time, which increases the risk of the fund getting exhausted quickly.
What to do then?
It is clear that it is not wrong to dream of retirement at the age of 40, but before turning it into reality, it is important to consider all its important aspects. Along with strong financial planning, you also have to think about the purpose of your life and social engagement.
How do rich people use both of these?
Rich people use both these principles together, not separately:
1. Increase wealth through compounding:
They keep their money in investment options like SIP, mutual funds, and the stock market for a long time so that they can get the full benefit of compounding.
2. Make the right decisions using discounting: They use discounting to understand how their expenses will grow in the future. This helps them set the right investment goals today, so that they can beat inflation.
Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
