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HOW TO RETIRE EARLY

     



      Everybody wants to achieve financial independence as early as possible.  Once we stopped working for others, we can live our lives fully - soul-satisfying
    Suppose one is employed and his lively-hood totally depends on salary and no other income or asset.  How can he plan for early retirement?  I will give you one formula that will empower you to retire early.  Yes, math can change your life.

    Say, S is your yearly savings and E is your yearly expenses.  First, we have to find 'savings to expenses ratio'- STE or S/E.  Suppose your savings is one lakh per year and the expenses is 6 lakhs per year,
STE = 1/6=0.166
If  savings is 20 lakh and expenses are only 10 lakh, then,
S/E =20/10=2.

     We got STE.  Let us assume that you invest your savings in a financial instrument that gives a rate of interest 'r'.  After 't' years, you will get a nest-egg or bulk money which you can invest again to get handsome monthly returns.  (Let us assume that you maintain STE properly.  As the expenses increase with years, savings should also increase).

    How many years you have to save?  What is 't'?
The great formula is :
t = log (25r+STE/STE+Br/t)/Log (1+r)
'B' is the balance amount you already have. I will give you some worked-out examples in table form below.  r is taken as 6%

STE              t- number of years
                        for retirement
0.10                      48
0.25                      33
0.50                      24
0.75                      19
1                           16
2                           9.6
3                           6.9
5                           4.5
10                         2.4

What we understand from the table.
1. If you spend 10 times what you save each year (STE=0.1), you may have to work forever (48 years), if no pension scheme.
2. Even a small improvement in your STE ratio can make a big difference.
3. Let us consider one hypothetical example.  Say, you are a bachelor.  You spend only one lakh per year.  But your income is very high.  Hence you save 10 lakh per year.  Now, your STE is 10.  The above table says you require only 2.4 years for retirement. (is it?).  After 2.4 years you will have more than 25 lakh (INR) as a nest egg.  You can invest it in a bank deposit and get a monthly return of more than 10000INR and above one lakh per year.  Now, you can retire and spend as usual.  But you have to think innovatively to cover up the inflation (rising prices).
    Retiring in two and half years may be far-fetched.  But you can safely retire in 20 to 25 years if you follow our STE rule.
    If you have good bank balance, passive income like rent, immovable and movable assets,  it will further accelerate your retirement.
    Retire early - live your dream.              

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