Early retirement has seen an uptrend in recent years. With rising income and people’s propensity to follow their passion, many professionals are opting for early retirement. It’s crucial to know about the financial checklist you should tick before taking early retirement.

All Loans Cleared

Do you have an outstanding loan amount? Loans are liabilities and must be closed before you think of early retirement. You may not want to worry about monthly outgo when you no longer earn money. So, the first priority is to close all the loans. Even if you have to close a loan before the maturity period, you should try doing it.

Retirement Fund Has A Sufficient Corpus

After retirement, you must assume you won’t return to a regular working life. In an early retirement case, it is assumed that you do not want to do a normal job but follow your passion. It may earn you an income, but you should not consider that in your decision to retire early. So, you need to have sufficient corpus at the time of your retirement. Having a sufficient corpus will keep you free from financial distress and let you focus on what you want to do.

Have An Adequate Emergency Fund

Life is uncertain. While people anticipate and plan based on events, there is no guarantee that any other negative circumstances will not occur. To cover for the uncertainty or unanticipated events, have an emergency fund ready to dip into. Emergency funds should be kept separately from your retirement corpus. Keep your contingency fund invested so it grows with time and doesn’t lag behind the prevailing inflation rate.

Plan Smartly For Regular Income

While a big corpus may seem adequate to provide a financially secure life, it is always advisable to invest an adequate part of your corpus in appropriate monthly income schemes. This serves two purposes. The first is it earns a regular income for you. The regular income should meet your basic monthly expenses. The second is your money is invested in safer assets. There are several monthly schemes managed by the Government which are almost risk-free. Not only that, they provide much higher interest rates than bank deposits.

Have Sufficient Health Insurance

Health insurance is a must, regardless of whether you are taking early retirement. However, in the case of early retirement, this becomes even more important because your healthcare expenses may go up with ageing while you do not have a regular source of income. Ensure that the health insurance covers most health issues and preferably allows cashless treatment. At the same time, look for a hassle-free claim process.

When choosing early retirement, make sure you maintain a good credit score, you don’t have issues related to income tax, and there is a plan for how you would like to spend time during your retirement.

The author is an independent financial journalist.