People often fail to chase their hobbies and skills because of their long-term commitment to work. However, early retirement can help them reconsider chasing their dreams. But is it easy to retire early? The answer lies in how well you plan the financial aspects of your early retirement. Here are five things you should remember before creating a financial plan for early retirement.

Carefully Ascertaining The Post-Retirement Expenses

Before you create the financial plan, you must ascertain all the expenses you may incur after retirement. It should factor in costs related to lifestyle changes, health-related expenses, and regular expenses such as electricity bills, travelling expenses, grocery payments, etc. If you plan to change the city of residence, consider the cost of shifting to another city.

How You Would Manage Debt After Retirement?

Ideally, you should prefer to close all the loans before you retire from the work-life. However, if you take an early retirement along with outstanding debts, you must consider the repayment strategy while making the financial plan for your retirement. After retirement, the EMI may increase if the interest rate goes up, so you must make appropriate financial provisions for such a situation so that it doesn’t lead to financial distress.

Accomplishing Insurance Needs

After retirement, your dependency on health insurance increases significantly as you can’t afford to use your retirement corpus to meet big-ticket medical expenses. So, before creating a financial plan for your retirement, ensure you hold adequate health insurance that can provide sufficient cover from health risks during your retirement period.

Ensuring That You’ll Be Able To Beat Inflation After Retirement

As you may stop working after an early retirement, you must depend on your retirement corpus to meet all your expenses and achieve your post-retirement financial goals. It is necessary to make a plan to beat inflation so you don’t outlive your retirement savings. Make timely adjustments in your investment portfolio so that your retirement corpus beats the inflation after your retirement and, at the same time, it matches your risk profile.

Keeping ‘Plan B’ Ready If Early Retirement Doesn’t Work As Desired

If you have planned everything well, there is less chance of failing in early retirement. However, you must stay with “plan b” to recover quickly if early retirement doesn’t go as planned. Before creating a financial plan for early retirement, make a list of work you can do if your early retirement fails. You can also make an exit plan and return to working life if the early retirement goes wrong.

When retiring early, you should maintain extra financial cushions like a bigger contingency fund, bigger retirement corpus and regular side income. Regularly review your financial preparations for early retirement and say goodbye to work once you are completely sure you are ready.

 The author is an independent financial journalist