Retirement is an exciting time. You can enjoy your hobbies. You are free to do what you want because you have stopped working. If you run your own business, you're ready to let it go and maybe let your children take over. There are many more reasons that make people interested in early retirement. Are you one of those who want to retire early?
Early Retirement Is…
Early retirement, as the name suggests, is retirement earlier than it should be. The working period is actually not over, you could even say those who retire early are still at a productive age. A private employee who decides to retire at the age of 45, for example, can be categorized as early retirement because in general the retirement age is above 55 years.
Anyone can enjoy early retirement as long as they meet a condition that is popularly known as financial freedom. Those who have achieved financial freedom generally no longer have worries or anxieties about how to make ends meet. Those who are already at the stage of financial freedom can be said to have sufficient savings and financial investments.
What Are the Signs that You are Ready to Retire at a Young Age?
Before deciding to completely stop working to retire at a young age, let's first check the signs of someone who is ready to retire early.
1. All debts have been paid off
Having debt can make your heart skip a beat. If you still have debt when you retire, you must be prepared to spend a large amount of money to pay it off. Therefore, it is best to make sure that there is no debt left behind when you are going to retire early.
2. Have emergency funds
One of the biggest mistakes retirees can make is ignoring the importance of an emergency fund. In fact, an emergency fund is actually a very important savings to have. Emergencies can happen to anyone indiscriminately. With an emergency fund, you don't need to dip into your retirement savings to deal with emergencies or unexpected occurences.
3. Health costs are covered
As you know, medical expenses are not cheap. The older you get, the greater the possibility of the emergence of various kinds of diseases. Anticipating this is the best step to take.
So that your emergency fund savings and other savings are not drained for health costs, you can consider private health insurance. If during your work you get health insurance from the company, generally the benefits end when you no longer work at the company.
4. Have sufficient retirement savings
Of course, by letting go of your job to enjoy retirement, you should already have sufficient retirement savings. You have to prepare funds not just for the first few months of retirement. That way, you can have peace of mind, without worrying about whether there is money for 5, 10, 15 years and even more after you start retiring.
5. Have a diverse portfolio to protect your wealth
Asset diversification is an important thing to do, not only for those who want to retire early, but for everyone. Mitigate risks by saving money in several places. Avoid putting all the retirement funds in just one savings. You can invest some of the money in deposits that provide fixed interest. Another option is, for example, investing in mutual funds.
How Much Money to Prepare to be Able to Retire Early and Comfortably?
Many factors affect how much savings or retirement money you must have before you decide to leave your current job or business, such as the retirement age target, lifestyle (whether the needs will be the same, more or less than now) as well as inflation assumptions per year. Rp10,000,000 now, of course, will not be the same as 20 years later due to inflation.
To find out the estimated amount of money that must be prepared for retirement, you can use the formula FV= PV x (1 + I)^n. FV is the cost of living at retirement, PV is the current cost of living, I is inflation, and n is the time difference between the current age and the chosen retirement age (source: Kumparan).
The calculation of the retirement funds that you have to prepare does not stop there. You also have to take into account life expectancy as a factor in determining how much money needed during retirement. According to the Central Statistics Agency (BPS), life expectancy in Indonesia in 2022 was in the range of 73.83 years for women and 69.93 years for men.
Still quoting from Kumparan, to calculate the estimated total cost of living during retirement, the formula is as follows: future living expenses x 12 months x retirement period (life expectancy minus retirement age).
Prepare Retirement Savings in Jago Term Deposit
So, after doing the calculations using the two formulas above, are you sure about your plan to retire at a young age? You can start setting up your retirement funds in a Jago Term Deposit.
Why Jago Deposit? Because by saving in the Jago Deposit, you can get a competitive interest. The bigger your money in the Jago Deposit, the bigger the interest.
Choose the automatic roll over of both the principal funds and the interest at maturity to ensure that your retirement funds are safe and you don’t dip into your savings at all.
Invest Retirement Money in Bibit Mutual Funds
Apart from saving for retirement funds in the Jago Term Deposit, another way to diversify assets is to invest money in mutual funds.
Investing in mutual funds at Bibit is very convenient and practical because you can do it directly from the Jago application. Enjoy free mutual fund investment top-up fees and the convenience of monitoring mutual fund investment portfolios from the Jago application. For this, you only need to link your Jago account and your Bibit account.
Investing in mutual funds at Bibit, you are free to choose your own product. However, Bibit also has robo advisors that can help optimize your investment according to your risk level. So if you are still a beginner investor, you don't need to worry.
The Bottom Line
After reading the article above, are you ready to retire early? For those who plan for early retirement, you can start preparing your retirement funds and make sure you can check all the signs above. You can be a Jagoan of early retirement.
