Yes, you can do a Jack Ma and retire rich at a young age? Just do this FIRE thing

Alibaba cofounder Jack Ma took all of us by surprise by announcing his retirement to pursue philanthropy in education. The 54-year old entrepreneur is not the first one to use his wealth for philanthropy, but retiring from a world class business set up from scratch at a 'young' age of 54 years is somewhat unique.

In India, too, we have seen entrepreneurs who built large scale world classes businesses pledge a large part of their wealth for philanthropy, but at an older age. Retiring early is a new trend, not only among successful entrepreneurs, but also among business owners and corporate employees.

Generational change
We would have heard of stories from our parents and grandparents on how they worked for 40 years. The older generation grew up in a society that suffered from scarcity of resources. This fear of scarcity made them insecure. The driving force for working for 40 years or more was to accumulate maximum savings, so that there is no scarcity in their retired life when there would be no running income.

The older generation saved not only for their retired life, but also to leave behind wealth for the next generation so that the next generation does not have to live most of their life in scarcity.

The present generation, has grown up in relative comfort and abundance of resources. The current generation seems to be more secure (which may not be true) about its future. In many case they also have the cushion of savings left behind by their parents who accumulated savings. The current generation is more confident than the previous generations. We are now more confident as a nation unlike the years just after independence.

Also read: Top 5 Jack Ma quotes

The thinking of the society at large is also undergoing a change. Eyebrows are no longer raised when a person opts to retire at an age that was considered 'prime' working age some 20 year ago. For the corporate executive the seed of early retirement grows because the rat race gets tougher as one climbs the career ladder or the need to do 'something more meaningful' takes precedence. In the case of business owners, there is a lower urge to retire early.

Start planning early
Most individuals who plan to retire early, unfortunately, start to plan their finances late. Financial planning is never a priority. Bigger cars, fancier mobile phones, overseas holidays, bigger houses, etc, always take precedence. Thankfully, there is a change and individuals are showing an inclination to get into financial planning. People are buying term insurance, health insurance and mutual funds at an early age.

FIRE
FIRE (Financial Independence Retire Early) is gaining popularity. It seems this urge to retire early is more prominent in the corporate world. In business owners the incidence is lower.

I know a young couple who are running their own separate businesses and had to make a choice of buying a house or using funds to expand and diversify their businesses. They have opted for the latter with the medium-term goal of selling off the businesses and retiring early. They want time to enjoy fruits of the hard work they put in building the businesses.

Employee Stock Ownership Plans (Esop) have a big played in wealth creation at an early age. This has enabled many young corporate employees to think about early retirement. I see Esops continuing to play a role in the wealth creation.

The trend of retiring early is clearly gaining momentum and we will witness this more in the coming years. Financial planning for early retirement will also gain importance and prominence.

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2-POINT DREAM PLAN
Today’s generation thinks of retirement an age that was earlier considered ‘prime’ working age   

Early financial planning is essential for early retirement 

By: Vikram Chhokar
(The writer is head- north and east, Karvy Private Wealth)

Source: DNA Money