{"id":4342,"date":"2023-07-20T09:22:53","date_gmt":"2023-07-20T03:52:53","guid":{"rendered":"https:\/\/dushyantnomics.com\/?p=4342"},"modified":"2023-07-20T09:22:56","modified_gmt":"2023-07-20T03:52:56","slug":"known-unknowns-early-retirement","status":"publish","type":"post","link":"https:\/\/dushyantnomics.com\/known-unknowns-early-retirement\/","title":{"rendered":"Known Unknowns of Early Retirement Planning"},"content":{"rendered":"\n

What does a complex sounding concept like known unknowns of early retirement planning mean?<\/p>\n\n\n\n

Let us dig right in to understand this.<\/p>\n\n\n\n

It is hard to correctly predict how financial markets will perform over the next 10-20 years.<\/p>\n\n\n\n

Several things will impact future inflation & investment returns that we don\u2019t even know about today.<\/p>\n\n\n\n

For example, a future pandemic, a natural disaster, or some major political event could upend the financial markets.<\/p>\n\n\n\n

We can neither easily predict nor control these things that can impact financial markets.<\/p>\n\n\n\n

These events are the so-called unknown unknowns.<\/p>\n\n\n\n

On the other hand, there are some factors in your life that can be categorised as the known unknowns.<\/p>\n\n\n\n

These are the big life decisions that you know you will have to make at some point in the future.<\/p>\n\n\n\n

You have a degree of control over these decisions.<\/p>\n\n\n\n

These decisions will impact your early retirement plan, but you can\u2019t predict in advance how they will pan out.<\/p>\n\n\n\n

It all depends on the choices you make when you reach the decision-making stage.<\/p>\n\n\n\n

These are the so-called known unknowns of early retirement planning.<\/p>\n\n\n\n

The Known Unknowns of Early Retirement Planning<\/strong><\/h2>\n\n\n\n

There 3 major known unknowns of early retirement planning are decisions about your financial dependents, marriage, and kids.<\/p>\n\n\n\n

\"known<\/figure>\n\n\n\n

Financial Dependents<\/strong><\/h3>\n\n\n\n

Depending on your personal situation you may have some financial dependents. This is applicable even if you a single.<\/p>\n\n\n\n

The first place to look at is the financial condition of your parents.<\/p>\n\n\n\n

Are they financially independent or will they depend on you to take care of them financially in their retirement?<\/p>\n\n\n\n

In case they are not financially independent, then your personal financial plan<\/a> needs to cater for their financial needs as well.<\/p>\n\n\n\n

You can help them prepare for their retirement even as you prepare for your own.<\/p>\n\n\n\n

If you are parents are still in employment, you can help them save more effectively by using the knowledge you are gaining on your own financial journey.<\/p>\n\n\n\n

The other thing to consider is their health-care coverage.<\/p>\n\n\n\n

Medical costs go up with age and an unplanned medical expense for your parents could hit your own early retirement corpus.<\/p>\n\n\n\n

Therefore, it is important to check if they have adequate financial coverage to cope with any unexpected medical emergencies.<\/p>\n\n\n\n

This can be achieved via adequate insurance or a separate medical corpus.<\/p>\n\n\n\n

Single Parent<\/strong><\/h4>\n\n\n\n

While your dad may be financially independent due to his pension, will the same be applicable for your mom if he is no longer around?<\/p>\n\n\n\n

Effective planning for the financial wellbeing of your parents should also include the phase when only one of them will be around.<\/p>\n\n\n\n

Your parents are also the target group for being sold bad financial products. They are more likely to easily trust a financial salesperson.<\/p>\n\n\n\n

As a result, they could end up with expensive and unsuitable financial products being sold to them.<\/p>\n\n\n\n

This means you should be taking an active interest in how your parents are managing the retirement funds they have saved up.<\/p>\n\n\n\n

You can help your own retirement preparations by helping them stay on track.<\/p>\n\n\n\n

One of the best gift that parents can give to their kids is to be financially independent in their retirement.<\/p>\n\n\n\n

Your parents may or may not be in that category for any number of reasons.<\/p>\n\n\n\n

However, by being aware of their financial condition, you can plan your own journey more effectively.<\/p>\n\n\n\n

This will also help you avoid any unpleasant surprises down the road as you get closer to your own early retirement.<\/p>\n\n\n\n

Marriage<\/strong><\/h3>\n\n\n\n

Who you decide to marry and how life pans out thereafter has an enormous impact on your overall wellbeing.<\/p>\n\n\n\n

The decision to get married and the financial personality of your spouse will have an out-sized impact on your ability to retire comfortably.<\/p>\n\n\n\n

And this is not an under-statement.<\/p>\n\n\n\n

Here is why:<\/p>\n\n\n\n

Relationship with Money<\/strong><\/h4>\n\n\n\n

We are all quite different when it comes to how we view the role of money in our lives.<\/p>\n\n\n\n

Some prefer to live in the moment and not worry too much about the future.<\/p>\n\n\n\n

Some others may border on extreme frugality and feel guilty about spending on even the smallest of luxuries.<\/p>\n\n\n\n

While some couples run their financial accounts individually, when it comes to early retirement planning it is a joint decision.<\/p>\n\n\n\n

It needs active coordination from both partners.<\/p>\n\n\n\n

It can become incredibly challenging if both of you are not aligned on your common relationship with money<\/a>.<\/p>\n\n\n\n

Saving money for your early retirement corpus<\/a> requires a disciplined approach to handling money.<\/p>\n\n\n\n

While you may be good with saving but if your spouse is a natural spender that can make things particularly challenging.<\/p>\n\n\n\n

Imagine you saving diligently for a month and then your spouse blows it all up on a single impulsive purchase.<\/p>\n\n\n\n

Not only will that harm your retirement corpus, but it will significantly impact your relationship as well.<\/p>\n\n\n\n

Spouse\u2019s Dependents<\/strong><\/h4>\n\n\n\n

Once you get married you may be taking over some new dependents.<\/p>\n\n\n\n

It will be anyone that is financially dependent on your spouse.<\/p>\n\n\n\n

This could be your in-laws or anyone else that your spouse would like to support financially.<\/p>\n\n\n\n

As a result, the issues that we looked at with respect to your dependents will become applicable for your spouse\u2019s dependents too.<\/p>\n\n\n\n

The same analysis you conducted for your own dependents, should be conducted for your spouse\u2019s dependents too.<\/p>\n\n\n\n

Children<\/strong><\/h3>\n\n\n\n

Here are 2 statements about kids:<\/p>\n\n\n\n