Financial Independence vs Regular Retirement |My Money Sage

Financial Independence/Freedom is a state in which you have enough wealth to lead your entire life comfortably, without having to work for it. In other words, you would have attained financial freedom when your passive income exceeds your expenses.

 Financial Independence vs Regular Retirement

In this article, we will be looking at regular retirement vis a vis FIRE (Financial Independence & Retiring Early).

And, for retiring early, reaching financial independence is the key. In fact, in both cases of retirement, early and regular, you have to become financially independent. The former is difficult because you have to achieve far more in very less time.

Many of us have dreamt of retirement by mid-career of professional life and make the best out of life then. However, very few can realize it, because its challenging, even for those with a well-paid job. Early retirement is not about retiring early from professional life with what you have; in fact, it’s about reaching financial independence that enables you to quit your professional career.

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Financial Independence & Retiring Early (FIRE)

Achieving financial independence is not an easy task as it requires years of painstaking effort and discipline to get there.

The three most essential points to initiate with FIRE approach is visualization, planning, and disciplined investing.

Visualization: It is the most critical part for the success of financial independence, as you assess your current position and future obligations to calculate the retirement corpus.

Planning: After calculating your retirement corpus, you need to work on your choice of investment instruments and how you are going to achieve that efficiently.

Disciplined Investing: This will help you to execute the investment strategies and stick to it during different market cycles, without losing nerves to reach your goals.

The FIRE approach requires you to invest more than half of your income and have zero debt. It also requires you to reduce all unnecessary expenditures and get rid of flab around your lifestyle.

One point you should understand that financial freedom and retiring early doesn’t mean cutting down your long term goals or avoiding necessities of life, it now means how efficiently and effectively you are going to achieve that.

According to  Robert Kiyosaki, the author of one of popular personal finance book, “Rich Dad Poor Dad,”

“Financial freedom is available to all those who learn about it and work for it.”

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How to Plan Your Financial Independence

Getting around the right financial independence number is the key to its success, and wrong estimates can have serious implications.

According to the FIRE thumb rule, you need to have at least 25 times of your current expense level at retirement. But to remain on the safer side, you need to increase the amount by 30-35 times, as it will take care of any exigencies.

Regular increase in asset allocation equally helps in reaching the magic number efficiently. Remember, all life stages of a person are not equal, and responsibilities are highest, when you are at the mid-career level, that only recedes at the late-career stage.

So, you need to factor in each and every small detail in your FIRE number.

Also Read: NPS vs. Mutual Funds: A Retirement Planning Perspective

Pros and Cons of Financial Independence

Achieving financial independence is a big accomplishment that requires a great deal of effort from a person. Apart from passive lifetime income, some big benefits that follow are:

You can actually retire early

Can experience freedom and flexibility in life

Allocate more time to what you enjoy

Peace of mind and less stressful life

A greater sense of financial security

Though the benefits attract you to the journey towards financial independence, there are few disadvantages also.

Compromise on many material pleasures

Cutting back on expenditures

Devote significant time towards actively planning and managing FIRE process

If retiring early, you run the risk of losing social security benefits

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Regular Retirement

Most of the people around us, generally opt for regular retirement, working full tenure of their professional career. Regular retirement is more convenient as you get ample time to plan your investments, less budgeting requirement, and no need to have a punishing spending chart, compared to early retirement.

In most of the cases of regular retirement, retirees get the benefit of social security schemes such as pensions, which replaces the salary income. So, for most, getting into the business of wealth creation doesn’t make sense.

Further, who enjoys their professional life or social workers or one having significant responsibilities to fulfill, the journey towards financial independence is less attractive and doesn’t make economic sense.

Retiring at age 60 also gives you an added advantage, i.e., compounding. It helps your investments to grow at an increasing rate with every passing year. The increase is value is due to interest earned on both principal and accumulated interest. Thus, smaller regular contributions can also get you near to your planned retirement kitty.

Also Read:How to be Successful at Retirement Planning 

Pros and Cons of Regular Retirement

There are no significant drawbacks in the concept of regular retirement, and it is up to the people how they look at it. One benefit of regular retirement over early retirement is, you don’t have to plan for those additional years of non-working life and inflation, which degrades the investment value.

Financial Independence and Regular Retirement

The one who plans to have a regular retirement can also go after financial independence. It has become a need in this changing time as certainty and security of a job are not guaranteed anymore.

We have seen in the past as well as experiencing it, how the change in technology, closure of companies are severely affecting the employment status of many people.

In order to deal with such a situation, financial independence is the key, as it will motivate and help to run your life and fight the crisis.

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The concept of financial independence should not be only kept limited to early retirement, but it should be expanded. The benefits associated with it are plenty and is helpful to every category of people.

With changing time, financial independence has gained relevance, not for just early retirement but also as a savior in tough times. Thus regular retirees should also aim for early financial freedom than to schedule it near to their retirement.

In the end, I want to state, when your back (finances) is secure, you can grow in strength to strength and do wonder to yourself.

About the author

KishorKumar Balpalli, believes that financial literacy and discipline is the key to one’s financial freedom. KishorKumar is a Certified Financial Planner, Personal Finance Blogger & the Founder of an award-winning Wealth Management platform. myMoneySage simplifies investing for individuals and amplifies business growth for Registered Investment Advisers by leveraging Artificial intelligence and machine learning. The AI of the machine plus the intellect of the human advisor enables comprehensive & client-centric advice at a fraction of the cost of a conventional adviser. is an award winning personal finance platform. It helps you aggregate all your personal finance accounts like FD, Equity, Mutual Funds, PPF EPF, NPS including, Credit Cards & Loans etc. It's one place where you can track, plan and invest seamlessly. empowers you to invest in zero commission direct plans of mutual funds thereby helping you generate higher on investments. The best part is it comes with a lifetime Free plan.

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