Continuing Saturday School’s Reimagining Retirement series,we hosted a thought-provoking webinar on FIRE (Financial Independence/RetireEarly) with one of our industry’s most prominent FIRE proponents – Karan Datta,who gave us a personal account and valuable tips on how to plan for FIRE, howto make the transition and how to deal with the new normal. Joining him withrich insights for MFDs was K S Rao, head of ABSL AMC’s IEDD team.
Here are the key points made by both panelists:
STAGE 1 : Planning
Karan Dutta
Outline : Started planning 10 years ago, had a FIREgoal set for 50 not necessarily to retire but to take control of his choices
Salaries don’t create wealth : You can’t rely onsalaries and bonuses to create wealth, it is important to start thinking of athird line of income – investments and ESOPs.
Sustainability is key : Don’t undercut your spendingso much that your entire plan collapses. It is important for the process tocome naturally because this is a lifestyle, not a short-term sacrifice
KS Rao
“Be prosperity minded rather than poverty minded” : Buildyour wealth by growing your money, not by cutting expenses that bring you joy
Fat FIRE is intertwined in the “Indian way” of savings
Karan Dutta
Adjust your risk taking capacity over your savingsability : A 95-5 Equity to debt ratio seems very risky but equity is thebest way to build wealth. If that’s too much, even a 70-30 Equity to Debt ratiopost retirement can comfortably see you through
STAGE 2 : TRANSITION
Karan Dutta
“We are often defined by our business cards” : Thebiggest challenge is the emotional aspect of giving up the professional titleand your place in society that comes with it
As a society we are wired to work : We’ve heard it throughgenerations but we all know retirement is in the future – be it early or late,so why not figure out our purpose 15 years before we stop going into work?
Listen to yourself : Devote time to evaluating yourlife, your mind often knows exactly what it wants. Figure out who you areoutside your profession, it makes the transition that much easier and moreenjoyable.
KS Rao
Don’t restrict retirement planning to excel sheets :Take some time to understand your client’s emotions and their drivers towards FIREso you can become a sounding board for them
Karan Dutta
“It does not take tons of money [to retire early]” :You don’t need upwards of a 100cr to retire early. In the US, 4% SWP has beendetermined as a safe withdrawal rate. In India, we can perhaps take 5-6%. Youcan be in the single digit crore mark and still comfortably retire early!
“Worry more about how you’re going to spend your time ratherthan if you have enough money to spend”
It is not mandatory to have a “side hustle” postretirement : It can be very helpful as it definitely alleviates some of therisk. However, it is important to be mindful of the reasons you’re doing it,these must stem from passion and exchange of good ideas
STAGE 3 : Post-Retirement
“It is a time for recreation and re-creation” – KS Rao
Karan Dutta
Your second stream of income should be for your emotionaltransition : It might not be for financial reasons but the importance ofkeeping your self esteem up cannot be stressed enough
Adjust your plans real time : There will be times duringmarket fluctuations where your withdrawal rate will change. Your excel sheetsaren’t cast in stone.