Taking the decision to retire early is a life choice, while picking your specific early retirement date is a more tactical step.
As outlined in the guide to early retirement in India, choosing to retire early is a life project that will take you years or decades to achieve.
Choosing the exact date for pulling the trigger on early retirement is more tactical decision.
Once you enter your early retirement sweet spot, you need to pick a specific date within that zone.
The specific early retirement date you pick is typically based on several factors. Taking care of these will ensure a smooth transition into early retirement.
How to Pick Your Early Retirement Date
Some factors that help you pick your early retirement date are common to all early retirees.
In addition, there could be other factors are unique to your specific situation. Let us now look at each of these factors in detail.
One of the key early retirement planning tips is to stress test your marriage before your early retirement date.
Your spouse may be working on a specific project or pursuing an independent career.
Your early retirement date needs to be aligned with whatever plans they have for their own career.
Communicate with your partner and coordinate the best time to call it quits on your job.
This will avoid any conflicts later on when you are ready to start your early retirement life.
Take this opportunity to discuss any changes in your household responsibilities to ease the transition.
If you are planning to move cities after your quit your job, it will have an impact on your kid’s education and social life.
They may still be in school on the date you pick to retire early.
Moving cities in the middle of a school year can be disruptive.
It could be worthwhile to prepone or delay your early retirement date by a few months to align it with their school year.
You may also intend to fund the higher education expenses for your children.
Ensure you have separated any money you have saved for their higher education from your early retirement corpus.
If things go downhill in your early retirement for whatever reason it will not impact their separate higher education fund.
Your parents may be financially dependent on you. If so, your personal financial plan should have catered for this situation.
You have hopefully ensured that your retirement income streams cater for their living and healthcare expenses as well.
In case you plan to move cities in retirement, ensure that the new place has the required healthcare facilities in place.
Share the medical records of your parents with the new healthcare provider.
Check if they will be able to offer the level of medical care you expect for your parents.
This should be done prior to fixing your early retirement date. This will avoid unnecessary hassles at a later stage.
Your Stock Options & Termination Pay-outs
You may have some stock options or contractual pay-outs that require you to be in active employment with your current employer.
Consult a tax professional or financial advisor to figure out the best way to address those keeping your planned early retirement date in mind.
It will be possible to optimise some of them.
You also need to be mentally prepared to let go some of the deferred benefits if you choose to retire early.
You should also consider any end of service payments that require a minimum age for pay-outs. If those are a few months away, it may be ok to wait.
Otherwise, be ready to make a trade off to let go of those financial benefits instead of delaying your early retirement date by years.
Since this is a very employer specific situation there are no blanket right answers to go for. You need to deliberate and arrive at the right decision for you.
Are you planning to move to a different city or house in retirement?
In that case, your early retirement date should consider any existing obligations you have.
When does your house lease end if you are living in a rented apartment? If you plan to sell your current house, how long will that take?
There may also be some other contractual obligations or memberships that incur an early termination fee.
Avoid tying yourself up in any long-term contractual obligations once you get closer to your target early retirement corpus.
This will give you greater flexibility in picking your early retirement date without incurring any financial penalties.
Tax Regulations & Residential Status
Plan your early retirement date keeping the tax impact in mind.
If circumstances allow for it, then you can consider retiring early in the tax year. This may let you benefit from lower slab rates for the last few months of your employment.
This is more beneficial if you have any major termination pay-outs due. Those too could benefit from a lower rate of income tax.
Your tax residential status is another crucial factor to consider when fixing your early retirement date.
This is especially important if you are a NRI and plan to return to India after your early retirement.
You should plan to return to India after October. This will allow you to continue your non-resident tax status for that financial year as well.
Depending on your total stay outside India or your income in India, it may be even more beneficial to return to India in February or March.
Similarly consider any bank deposits or investments you have in India. Those could benefit from your non-resident status for a few additional months.
You should consult a qualified tax professional to determine the right time to switch your tax residency back to India.
Work History & Income Proof
As an early retiree you will be in a grey zone for many years. You may have the required net-worth but not have a regular income record.
You will also not fit the conventional description of a retired individual.
You will neither be a salaried employee nor self-employed for banking matters. This can cause unexpected frustration in day-to-day banking or government dealings.
You may also need some credit facilities after retiring. Use your current salary statements to get the required approvals in place before your early retirement date.
Your employer can provide a letter of support or income proof to support your case.
Consider any other services you may need in the future which require you to be in active employment. Get enrolled on those before your early retirement date.
You can also port and continue your employer health insurance. This will allow for continuity of your health insurance coverage.
Do Not Unnecessarily Delay Your Early Retirement Date
We have looked at some reasons why it may make sense to delay your early retirement date by a few months.
It is now time for an important caveat.
Do not use these reasons to unnecessarily delay pulling the trigger on your early retirement.
It is easy to look at these factors and succumb to the one more year syndrome. Do not use these factors as a crutch to delay your early retirement.
One of the most common regrets that early retirees have is that they did not pull the trigger and retire earlier.
You have the chance to avoid making that same mistake. There is a thin line between being cautious versus procrastinating.
The first principle is that you must not fool yourself and you are the easiest person to fool.Richard Feynman
Do not delay your early retirement date if you have checked all the boxes.
It can be easy to make up stories in your mind to avoid picking the exact date to retire early.
You have done the work required to get to this point.
Now be mindful, intentional and finalise your early retirement date.
Dushyant Choudhary is the founder of dushyantnomics, an early retirement blog for professionals. Dushyant retired early from his 9-5 corporate life after a successful international career. He brings his knowledge and experience to his current role where he’s dedicated to helping professionals achieve a fulfilling retirement.