Want to retire at 45… Don’t!

Most of us, during the drinking session which followed our graduation ceremony, made either of the two statements in a state of drunkenness or otherwise:

(a)    I can’t imagine myself working my entire life. I want to enjoy. I will retire the day I make XYZ amount of money (The XYZ varied between lakhs to at max a crore of rupees.)

(b)   I can’t imagine myself working my entire life. I will slog my butt off during the initial years and worst case I will retire when I turn 45.

Was I one of the many who said either of the two statements as mentioned above?

You bet I was.

This year I will turn 45 and by God’s grace have been able to exceed the monetary goal that I started off with (Just to think of it, was the goal too unambitious? Didn’t seem at that time though. After all those were the days when even the grandeur film villain Ajit was smuggling gold worth 5 lacs plus minus) but am I even remotely close to hanging my boots?

So what happened in these two decades that the “Retire Early” syndrome of the nineties has lost its significance?

Our parents were born at the time of India’s independence. Most of us saw them struggle to make ends meet. Life was difficult and there was too much scarcity. The large families make it a challenge for the bread-earners to even put two square meals on the table. Forget about ‘enjoying’. We saw our Parents striving hard and vowed to ourselves at an early age that one day we will earn a lot and make it a point to live the life for our own self instead of sacrificing it for others.

We ourselves grew up in the times of the emergency. During our childhood we heard stories of abundance and the comforts & luxuries in the West while we became a socialist state in which we waited for years to get a landline phone or a Bajaj Scooter. This went on till our country hit the economic nadir in 1991.

The same year I turned 20.

What would a typical 20 year old expect at that point in time? Having a car or own house seemed a distant dream. Having enough money and all comforts of life 25 years from then (ie when we turned 45) was seen as an ultimate achievement. And that’s exactly what we set out for ourselves.

But then things changed. Opening up of the economy brought in the first decade of the millennium that gave us growth & incomes we had never ever visualised as possible. The country broke the shackles of the Hindu rate of growth that tormented us in the last century and we were jettisoned into a stratum that we never knew existed. With money came increased awareness, better living conditions and world class health facilities. Life expectancy grew from 58 years to 68 years between 1991 and 2013. Amitabh Bachchan was 48 when he appeared in Agneepath in 1990. Compare that with Aamir Khan at almost the same age in 3-Idiots. Got the picture? Think of all the politicians and celebrities who are agile & kicking in their nineties. It clearly implies you will live longer if you know you don’t have to worry about survival.

Rising incomes also led to higher disposable incomes and people started spending on various comforts and luxuries. A car is no longer a luxury but a necessity or at worst a comfort. Eating out is prevalent across all socio economic classes. Traveling abroad is no longer for the elite. What it means is that all the stuff you wanted to do after retiring at 45, you are already doing. Now take a pen and paper and do a small exercise. Write down your annual earnings from 20 years back when you started earning and then jot down the forecast for the next 20 years at a nominal 5% p.a. increase when you officially retire at 65. Now add your earnings of the last 20 years and also add the forecasted earnings of the next 20 years. What do you find? Believe me when I say you have still not earned 80% of your total life earnings!!! This along with the fact as mentioned above that in all likelihood you will live till 90, it is evident you should DEFINITELY NOT retire at 45… Work till 65, earn the balance 80% of your life earnings, have enough to survive another 25 years of a healthy & comfortable retirement and keep enjoying…