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Retirement, the other best name for the word is ‘Financial Freedom’, simply a phase of life where you do not need to depend on a regular income thing to spend your life with the desired lifestyle! Contemporarily, retirement is not only hanging up your work, but it has a sense bigger than this.
Financial Freedom, today can be easily achieved before the traditional retirement age, say 60-65 years, only an individual must plan his savings, investment, and expenses in a much better way. Many plan for early retirement and invest accordingly to achieve it.
However, there can be some kind of hindrances, that prevent people from achieving early retirement. Leverage or your loans are one big obstruction when it comes to thinking about retiring. They can impact early retirement more but is just as bothersome at any age.
And then comes the important part to discuss, Can Any Individual Plan Their Retirement While They Are Still Repaying Their Home Loan?
Well, let us know if it is possible or not and if possible then how can an investor plan this!
Monthly Loan Repayment………….
Well, before we plan how to invest for retirement, first, you must consider how much of your monthly income is eaten up by your loan EMI.
If your monthly EMI is a very high proportion of your monthly income, you have to consider lowering it. You may not be able to repay the entire loan.
Lowering the EMI, however, by pre-paying some amount can be useful. Whatever means of regular income you have set up post-retirement caters mostly to lifestyle expenses, to fit in an EMI will mean lowering your lifestyle too. Hence, the lower the EMI, the better it is.
If your monthly loan repayments are a low proportion of your monthly income, say 20%-30%, you may be able to accommodate this even post-retirement.
The next way you can follow to save more, try down your expenses, like daily travel, expenses related to regular work attire, and entertainment. Others can be controlled a little till your loan is paid off.
This is important because there’s no easy way out, you will have to cut on your optional investment so that you can invest well for your retirement.
Keep Retirement Savings Pool Growing……………
After people retire, their capacity to take risks regarding their money goes very low, and this is the reason they often opt to move their investment and savings towards safe and stable return investments.
Well, this story has one other side too. Without investing in assets like equity you are in danger of inflation eating up your savings faster than you can reach them and you miss out on wealth creation.
Here what you can do is, prepay the outstanding loan before you retire and to make up the gap in your retirement kitty, invest a large portion in the equity assets.
The money invested in equity will come in use 5-7 years into your retirement, not any sooner. This will give your retirement funds a growth push for later years.
Well, when you plan this way, you need to keep in mind, that in the early years of your retirement, you have to be much greedy towards your expenses. For this, keep a lower proportion of safe assets towards regular income for monthly expenses.
Planning for retirement and repaying a home loan can be challenging but not impossible. Give yourself 5-7 years to plan and repay your loan. You have to manage your expenses and expectations accordingly.
Just keep in your mind that proper management of your expenses, saving, and investing can help you in both, owing to you a house and a retirement that give the feel of Financial Freedom!
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(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).