How to retire at 40 in India with Rs 41,000/month Pension or Rs 70 lakh cash

Public Provident Fund + SIP Plan: Nine to Five job is boring. Leaves no 'me time.' This is what a large section of millennials feel today. They want to grow rich and retire early, do what they wish. While literally, it is impossible for a person to retire at any stage of life, it is certainly possible as far as getting freedom from the stranglehold of a routine job is considered. Hence, it is no surprise that "How to retire at 40" is still a trending subject for millennial netizens. A quick Google search of the phrase "How to retire at 40" throws as many as 14,10,00,000 results!

The internet is flooded with strategies for retiring at 40. There are scores of people who have set examples by actually retiring from routine jobs at 40 and moved on to pursue their passions. The crux of all the "How to retire at 40" stories can be summed in two pointers: 

- Be clear about what you mean by retirement. Retirement can not actually mean doing nothing at all.  You need to have a plan, maybe a dream, to do something you will do after retiring from your taxing present-day job. 

- Be clear about your financials. Set goals. Invest. Grow money. Earn More. Save More. Retire with a lump sum that will keep you afloat. 

For financial health, you need to start saving and investing at the earliest possible opportunity. 

Financial needs differ from persons to persons as priorities differ for different income groups. But the wish to get rid of mentally taxing jobs could be common among many. While it may be easy for those in the high-income group, as they can obviously save and invest more, those in the middle-income groups can also dream of retiring at 40. Here's a simple illustration to show how this dream may be realised: 

Suppose you get employed at the age of 25 with an annual income of Rs 6 lakh. By saving and investing Rs 2 lakh of the Rs 6 lakh, one can meet some of the most pressing financial needs. 

For assured returns, it is advisable to split the Rs 2 lakh into two forms of investments - First, in guaranteed returns schemes like Public Provident Fund; Second, in SIPs that generally give good returns in the long run. 

Expecting a minimum return of 12% on a monthly SIP of Rs 8300 (approx Rs 1 lakh/year), one can expect a return of around Rs 41 lakh in 15 years. This money can be used for meeting basic financial needs after the early retirement. By putting this money in schemes like LIC Jeevan Shanti, one can start getting an immediate annuity of around Rs 3 lakh. 

The second Rs 1 lakh can be invested in the PPF which comes with a lock-in period of 15 years. One can extend this account beyond 15 years in an instalment of five years. At the current rate of 8% interest, the PPF account can turn an investment of Rs 1 lakh/year to Rs 29 lakh in 15 years. If this is extended for another 20 years, Rs 29 lakh can grow up to Rs 1.3 crores. 

In case you withdraw Rs 29 lakh of the PPF account at the age of 40, then coupling it with the earning from SIP, you will have a lump sum of Rs 41,000,000+29,000,000 = Rs 70 lakh. By investing this in Jeevan Shanti, you may start getting an immediate annual pension of Rs 5 lakh per annum (Approx Rs 40,000 per month). 

There are many ways in which you can plan your financials for retirement at 40. For best results, take the advice of an expert financial planner. 

(Note- Online calculators have been used for this article. Take expert advice before making any investment. Also, read all scheme related documents carefully before putting your money).