To retire early, forgo some of aspirational things people do in their younger days, says Vikram Chhokar

As a rising number of young Indians aspire to join the FIRE club, some of the basic things remain unchanged. Instead of investing in debt, FIRE aspirants need to keep their faith in equity. Someone who wants to retire at 40 cannot spend as much as somebody who wants a retirement at 60. You clearly have to forego some of the aspirational things that people do in their younger days and it requires a very disciplined approach, says Vikram Chhokar, who heads the wealth management business of Karvy Private Wealth for the north and east regions. In an interview with Kumar Shankar Roy, Chhokar talks about the FIRE trend in India, why healthcare costs should be kept in mind when planning for early retirement and the need to avoid large liabilities to be financially independent soon. 

Is India warming up to FIRE movement?

About 10-12 years ago, the number of people wanting to retire early was far lesser. The urge to retire early has increased in the last 5-7 years or so. A lot of clients, who did not talk about retirement earlier, are now talking of early retirement. The trend, very clearly, seems to be on the rise. It is the salaried individual or people who are working in companies or professionals like chartered accountants or architects, where we see this tendency is more compared to business owners. This is a clear difference we are seeing. 

If somebody wants to retire early, saving about 50% post-tax income and not taking large loans is key. Does the acquisition lifestyle of Indians support such plans?

Well, it is not easy. Saving 50% of your take-home salary seems to be right. But saving that kind of a money for a youngster who has just got into the workforce looks like a more difficult one. There are two reasons why. One, they suddenly get spending power in their hands. This drives their consumption which is higher. Secondly, even if one is not a lavish spender, it will be very difficult for a person to do that kind of savings in a large city. Coming to the second part on liabilities, if you have liabilities say you buy a large car, it will set you back by a couple of years. If you have to retire early, you clearly have to forego some of the aspirational things people do in their younger days. It requires a very disciplined approach. 

India still lacks a wholesome social security scheme where healthcare requirements are taken care of. For early retirement aspirants, shouldn't healthcare cost funding require a lot more serious thinking? 

Yes, in western economies the social systems take care of a lot of things. We clearly don't have those. So, anybody planning for retirement needs to factor in those expenses and inflation. You talked about health. Let me give you an example of transport. A lot of these western economies have well-spread public transport systems. But in India, this is not there at the moment. Even for our daily commutes, we end up buying cars. This is how we may pick up a loan liability for something as basic as transport. So, be it health or transport, costs must be taken into account very seriously while planning for early retirement. It should be far more detailed in terms of assessing monetary requirements. 

Homes today cost a bomb. Is exposure to real estate making it difficult for a person to retire early here?

A lot of people have managed to retire early because of real estate! They had invested in the good old days and a majority of them had decent returns. For the past 10-12 years, real estate as an asset class has not been that great. Coming to the main question of moving to bigger homes once the family expands, I would say that is how we are. Retiring early is not easy. If you have made money in real estate, and then re-invested it in real estate, the profit you made has gone back into consumption. The money could have been invested elsewhere and generated good returns for you. Real estate doesn’t seem to be a good option for retirement planning. Even the rental yields are quite low.